A.

MARITIME COMMERCE Kind of sale

(Arts. 573-869) Judicial Judicial and extrajudicial
Order of Preference
IMPORTANT CONCEPTS: A preferred mortgage shall have The preferred mortgage lien shall
1. Merchant vessel priority over all claims against the have priority over all claims
2. Maritime lien and Preference of Credit vessel, except the following against the vessel, except the
3. Doctrine of limited liability preferences in the order stated: following preferences in the order
4. Causes of revocation of voyage 1. Judicial costs of the stated:
5. Participants in maritime commerce proceedings; 1. Expenses and fees allowed and
6. Charter party 2. Taxes due the Philippine costs taxed by the court and
7. Loans on bottomry and respondentia Government; taxes due to the Government;
8. Accidents in maritime commerce 3. Salaries and wages of the 2. Crew’s wages;
Captain and Crew of the vessel 3. General average;
MARITIME/ADMIRALTY LAW during its last voyage; 4. Salvage, including contract
 It is the system of laws which particularly relates to the affairs and 4. General average or salvage salvage;
business of the sea, to ships, their crews and navigation, and to including contract salvage, 5. Maritime liens arising prior in
maritime conveyance of persons and property. (Notes and Cases on bottomry loans, and indemnity time to the recording of the
the Law on Transportation and Public Utilities, Aquino & Hernando, due shippers for the value of preferred mortgage;
citing Francisco, p.254) goods transported but which were 6. Damages arising out of tort;
not delivered to the consignee; and
 Maritime laws apply only to maritime trade and sea voyages. 5. Costs of repair and equipment 7. Preferred mortgage registered
(Pandect of Commercial Law and Jurisprudence, Justice Jose Vitug, of the vessel, and provisioning of prior in time.
1997 ed.) food, supplies and fuel during its
last voyage; and
 Arrastre service is not maritime in character. It refers to a contract 6. Preferred mortgages registered
for the unloading of goods from a vessel. (ICTSI vs. Prudential prior in time.
Guarantee, 320 SCRA 244)
 Effect of sale: All pre-existing claims in the vessel are terminated.
CHARACTERISTICS OF MARITIME TRANSACTION They will then be satisfied from the proceeds of the sale subject to the
1. Real - similar to transactions over real property with respect to order of preference.
effectivity against third persons which is done through registration.
(Rubiso vs. Rivera, 37 Phil. 72). The evidence of real nature is shown DOCTRINE OF LIMITED LIABILITY
by: 1) the limitation of the liability of the agents to the actual value of (HYPOTHECARY RULE)
the vessel and the freight money; and 2) the right to retain the cargo  Cases where applicable:
and embargo and detention of the vessel (Luzon Stevedoring Corp v. 1. Art. 587 – civil liability for indemnities to third persons
CA, 156 SCRA 169); 2. Art. 590 – indemnities from negligent acts of the captain
2. Hypothecary - the liability of the owner of the value of the vessel is (not the shipowner or ship agent)
limited to the vessel itself (Doctrine of Limited Liability). 3. Art. 837 – collision
4. Art. 643 – liability for wages of the captain and the crew and
 The real and hypothecary nature of maritime law simply means that for advances made by the ship agent if the vessel is lost by
the liability of the carrier in connection with losses related to maritime shipwreck or capture
contracts is confined to the vessel, which stands as the guaranty for
their settlement. (Aboitiz Shipping Corp. vs. General Accident Fire and GENERAL RULE: The liability of shipowner and ship agent is limited
Life Assurance Corp. 217 SCRA 359). to the amount of interest in said vessel such that where vessel is
entirely lost, the obligation is extinguished. (Luzon Stevedoring v.
MERCHANT VESSEL Escano, 156 SCRA 169) The interest extends to: 1) the vessel itself; 2)
 Vessel engaged in maritime commerce, whether foreign or equipments; 3) freightage; and 4) insurance proceeds. (Chua v. IAC,
otherwise. (Bar Review Materials in Commercial Law, Jorge Miravite, 166 SCRA 183)
2002 ed.) EXCEPTIONS:
 Constitutes property which may be acquired and transferred by any 1. Claims under Workmen’s Compensation (Abueg vs. San Diego 77
of the means recognized by law. They shall continue to be considered Phil 730);
as personal property. (Arts. 573, 585) 2. Injury or damage due to shipowner or to the concurring
 They are susceptible to maritime liens such as for the repair, negligence of the shipowner and the captain;
equipping and provisioning of the vessel in the preparation of a 3. The vessel is insured (Vasquez vs. CA 138 SCRA 553).
voyage, as well as mortgage liabilities, in satisfaction of which a vessel 4. Expenses for repair on vessel completed before loss;
may be validly arrested and sold. (Ship Mortgage Decree of 1978) 5. In case there is no total loss and the vessel is not abandoned;
6. Collision between two negligent vessels;
MARITIME LIEN
 It constitutes a present right of property in the ship, a jus in re, to  Abandonment of the vessel is necessary to limit the liability of the
be afterward enforced in admiralty by process in rem. (PNB vs. CA, shipowner. The only instance were abandonment is dispensed with is
337 SCRA 381) when the vessel is entirely lost (Luzon Stevedoring vs. CA 156 SCRA
 If the maritime lien arose prior to the recording of a preferred 169).
mortgage, it shall have priority over the said mortgage lien. (PNB vs.
CA, 337 SCRA 381) RIGHT OF SHIPOWNER OR SHIP AGENT TO ABANDON VESSEL
 Instances:
ORDER OF PREFERENCE IN CASE OF SALE OF VESSEL 1. In case of civil liability from indemnities to third persons (Art. 587);
2. In case of leakage of at least ¾ of the contents of a cargo
R.A. 6106 P.D. 1521 containing liquids (Art. 687); and
Effectivity date 3. In case of constructive loss of the vessel (Sec. 138, Insurance
Code).
1969 1978
Applicability
Overseas shipping only Both domestic and overseas
shipping
RIGHT OF ABANDONMENT
 2. Loss and damage to the goods loaded on the vessel without
SHIPOWNER OR SHIP AGENT CONSIGNEE prejudice to their right to free themselves from liability by
What may be abandoned abandoning the vessel to the creditors. (Art. 587)
Vessel Goods shipped
Instances Duty of Ship Agent to Discharge the Captain and Members of
1. In case of civil liability from 1. Partial non-delivery, where the Crew
indemnities to third persons (Art. the goods are useless without  If the seamen contract is not for a definite period or voyage, he
587); the others (Art. 363); may discharge them at his discretion. (Art. 603)
2. Sec. 138, Insurance Code; 2. Goods are rendered useless  If for a definite period, he may not discharge them until after the
3. In case of leakage of at least ¾ for sale or consumption for the fulfillment of their contracts, except on the following grounds:
of the contents of a cargo purposes for which they are a. Insubordination in serious matters;
containing liquids (Art. 687) properly destined (Art. 365); and b. Robbery;
3. In case of delay through the c. Theft;
fault of the carrier (Art. 371). d. Habitual drunkenness;
Effects e. Damage caused to the vessel or to its cargo through malice
or manifest or proven negligence. (Art. 605)
1. Transfer of ownership of the 1. Transfer of ownership on the
vessel from the shipowner to the goods from the shipper to the
B. CAPTAINS AND MASTERS
shippers or insurer. carrier.
 They are the chiefs or commanders of ships.
2. In case of (2), the insurer must 2. Carrier should pay the
 The terms have the same meaning, but are particularly used in
pay the insured as if there was shipper the market value of the
accordance with the size of the vessel governed and the scope of
actual total loss of the vessel. goods at the point of
transportation, i.e., large and overseas, and small and coastwise,
destination.
respectively.
 Nature of position (3-fold character):
CAUSES OF REVOCATION OF VOYAGE
1. General agent of the shipowner;
1. War or interdiction of commerce;
2. Technical director of the vessel;
2. Blockade;
3. Representative of the government of the country under
3. Prohibition to receive cargo at destination;
whose flag he navigates.
4. Embargo;
 Qualifications:
5. Inability of the vessel to navigate. (Art. 640)
1. Filipino citizen;
2. Legal capacity to contract;
Terms:
3. Must have passed the required physical and mental
1. Interdiction of commerce – A governmental prohibition of
examinations required for licensing him as such. (Art. 609)
commercial intercourse intended to bring about an entire
 Inherent powers:
cessation for the time being of all trade whatever.
1. Appoint crew in the absence of ship agent;
2. Blockade – A sort of circumvallation of a place by which all
2. Command the crew and direct the vessel to its port of
foreign connection and correspondence is, as far as human power
destination;
can effect it, to be cut off.
3. Impose correctional punishment on those who, while on
3. Embargo – A proclamation or order of a state, usually issued in
board vessel, fail to comply with his orders or are wanting in
time of war or threatened hostilities, prohibiting the departure of
discipline;
ships or goods from some or all the ports of such state until
4. Make contracts for the charter of vessel in the absence of
further order.
ship agent.
5. Supply, equip, and provision the vessel; and
PARTICIPANTS IN MARITIME COMMERCE
6. Order repair of vessel to enable it to continue its voyage.
A. Shipowners and ship agents
(Art. 610)
B. Captains and masters of the vessel
 Sources of funds to comply with the inherent powers of the captain
C. Officers and crew of the vessel
(in successive order):
D. Supercargoes
1. From the consignee of the vessel;
E. Pilot
2. From the consignee of the cargo;
3. By drawing on the ship agent;
A. SHIPOWNERS AND SHIP AGENTS
4. By a loan on bottomry;
Shipowner (proprietario)
5. By sale of part of the cargo. (Art. 611)
 Person who has possession, control and management of the vessel
 Duties:
and the consequent right to direct her navigation and receive freight
1. Bring on board the proper certificate and documents and a
earned and paid, while his possession continues.
copy of the Code of Commerce;
2. Keep a Log Book, Accounting Book and Freight Book;
Ship agent (naviero)
3. Examine the ship before the voyage;
 Person entrusted with provisioning and representing the vessel in
4. Stay on board during the loading and unloading of the
the port in which it may be found; also includes the shipowner.
cargo;
 Not a mere agent under civil law; he is solidarily liable with the ship
5. Be on deck while leaving or entering the port;
owner.
6. Protest arrivals under stress and in case of shipwreck;
 Powers and functions:
7. Follow instructions of and render an accounting to the ship
1. Capacity to trade;
agent;
2. Discharge duties of the captain, subject to Art.609;
8. Leave the vessel last in case of wreck;
3. Contract in the name of the owners with respect to repairs,
9. Hold in custody properties left by deceased passengers and
details of equipment, armament, provisions of food and fuel, and
crew members;
freight of the vessel, and all that relate to the requirements of
10. Comply with the requirements of customs, health, etc. at the
navigation;
port of arrival;
4. Order a new voyage, make a new charter or insure the vessel
11. Observe rules to avoid collision;
after obtaining authorization from the shipowner or if granted in
12. Demand a pilot while entering or leaving a port. (Art. 612)
certificate of appointment.
 A ship’s captain must be accorded a reasonable measure of
Civil Liabilities of the Shipowner And Ship Agent
discretionary authority to decide what the safety of the ship and of its
1. All contracts of the captain, whether authorized or not, to repair,
equip and provision the vessel; (Art. 586)
crew and cargo specifically requires on a stipulated ocean voyage
(Inter-Orient Maritime Enterprises Inc. vs. CA).
 No liability for the following:
1. Damages caused to the vessel or to the cargo by force
majeure;
2. Obligations contracted for the repair, equipment, and
provisioning of the vessel unless he has expressly bound
himself personally or has signed a bill of exchange or
promissory note in his name. (Art. 620)
Solidary Liabilities of the Ship Agent/Shipowner for Acts Done
by the Captain towards Passengers and Cargoes
1. Damages to vessel and to cargo due to lack of skill and
negligence;
2. Thefts and robberies of the crew;
3. Losses and fines for violation of laws;
4. Damages due to mutinies;
5. Damages due to misuse of power;
6. For deviations;
7. For arrivals under stress;
8. Damages due to non-observance of marine regulations. (Art.
618)
C. OFFICERS AND CREW
1. Sailing Mate/First Mate
2. Second Mate
3. Engineers
4. Crew
 No liability under the following circumstances:
1. If, before beginning voyage, captain attempts to change it, or a
naval war with the power to which the vessel was destined
occurs;
2. If a disease breaks out and be officially declared an epidemic in
the port of destination;
3. If the vessel should change owner or captain. (Art. 647)
Sailing Mate/First Mate
 Second chief of the vessel who takes the place of the captain in
case of absence, sickness, or death and shall assume all of his duties,
powers and responsibilities. (Art. 627)
 Duties:
1. Provide himself with maps and charts with astronomical
tables necessary for the discharge of his duties;
2. Keep the Binnacle Book;
3. Change the course of the voyage on consultation with the
captain and the officers of the boat, following the decision of
the captain in case of disagreement;
4. Responsible for all the damages caused to the vessel and
the cargo by reason of his negligence. (Arts. 628 - 631)
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
 Duties:
1. Preserve the hull and rigging of the vessel;
2. Arrange well the cargo;
3. Discipline the crew;
4. Assign work to crew members;
5. Inventory the rigging and equipment of the vessel, if laid up.
(Art. 632)
Engineers
 Officers of the vessel but have no authority except in matters
referring to the motor apparatus. When two or more are hired, one of
them shall be the chief engineer.
 Duties:
1. In charge of the motor apparatus, spare parts, and other
instruments pertaining to the engines;
2. Keep the engines and boilers in good condition;
3. Not to change or repair the engine without authority of the
captain;
4. Inform the captain of any damage to the motor apparatus;
5. Keep an Engine Book;
6. Supervise all personnel maintaining the engine. (Art. 632)
Crew
 The aggregate of seamen who man a ship, or the ship’s company.
 Hired by the ship agent, where he is present and in his absence, the
captain hires them, preferring Filipinos, and in their absence, he may
take in foreigners, but not exceeding 1/5 of the crew. (Art. 634)
Classes of Seaman’s Contracts
1. By the voyage;
2. By the month; and
3. By share of profits or freightage.
Just Causes for the Discharge of Seaman While Contract
Subsists
1. Perpetration of a crime;
2. Repeated insubordination, want of discipline;
3. Repeated incapacity and negligence;
4. Habitual drunkenness;
5. Physical incapacity;
6. Desertion. (Art. 637)
Rules in case of Death of a Seaman
 The seaman’s heirs are entitled to payment as follows:
1. If death is natural:
a. compensation up to time of death if engaged on wage
b. if by voyage - half of amount if death occurs on voyage out;
and full, if on voyage in
c. if by shares - none, if before departure; full, if after
departure
2. if death is due to defense of vessel - full payment;
3. if captured in defense of vessel - full payment;
4. if captured due to carelessness - wages up to the date of the
capture. (Art. 645)
Complement of the Vessel
 All persons on board, from the captain to the cabin boy, necessary
for the management, maneuvers, and service, thus including the crew,
the sailing mates, engineers, stokers and other employees on board
not having specific designations.
 Does not include the passengers or the persons whom the vessel is
transporting.
D. SUPERCARGOES
 Persons who discharges administrative duties assigned to him by
ship agent or shippers, keeping an account and record of transaction
as required in the accounting book of the captain. (Art. 649)
E. PILOT
 A person duly qualified, and licensed, to conduct a vessel into or out
of ports, or in certain waters.
 The term generally connotes a person taken on board at a particular
place for the purpose of conducting a ship through a river, road or
channel, or from a port.
 Master pro hac vice for the time being in the command and
navigation of the ship.
 While in exercising his functions a pilot is in sole command of the
ship and supersedes the master for the time being in the command
and navigation of the ship, the master does not surrender his vessel to
the pilot and the pilot is not the master. There are occasions when the
master may and should interfere and even displace the pilot, as when
the pilot is obviously incompetent or intoxicated (Far Eastern Shipping
Company vs. CA).
 Compulsory Pilotage – States possessing harbors have enacted laws
or promulgated rules requiring vessels approaching their ports to take
on board pilots licensed under the local laws. (Notes and Cases on the
Law on Transportation and Public Utilities, Aquino, T. & Hernando, R.P.
2004 ed. p. 518)
Liablity of Pilot
GENERAL RULE: On compulsory pilotage grounds, the Harbor Pilot is
responsible for damage to a vessel or to life or property due to his
negligence.
EXCEPT: BAREBOAT OR DEMISE CONTRACT OF
1. Accident caused by force majeure or natural calamity provided the CHARTER AFFREIGHTMENT (TIME OR
pilot exercised prudence and extra diligence to prevent or minimize VOYAGE CHARTER)
damages. Charterer becomes liable to Owner remains liable as carrier
2. Countermand or overrule by the master of the vessel in which case others caused by its negligence and must answer for any breach
the registered owner of the vessel is liable. (Sec.11, Art.III PPA Admin of duty
Order 03-85)
Charterer regarded as owner pro Charterer is not regarded as
hac vice for the voyage owner.
SPECIAL CONTRACTS OF MARITIME COMMERCE
Owner of vessel relinquishes The vessel owner retains
1. Charter party
possession, command and possession, command and
2. Bill of lading
navigation to charterer navigation of the ship
3. Contract of transportation of passengers on sea voyages
4. Loan on bottomry
5. Loan on respondentia
6. Marine insurance Common carrier is converted to Common carrier is not converted
private carrier. to a private carrier.
CHARTER PARTY
 A contract by virtue of which the owner or agent binds himself to
transport merchandise or persons for a fixed price.
 A contract by which an entire ship, or some principal part thereof is
let/leased by the owner to another person for a specified time or use. PERSONS WHO MAY MAKE A CHARTER
(Planters Products, Inc. vs. CA, 226 SCRA 476) 1. Owner or owners of the vessel, either in whole or in majority
 Parties: part, who have legal control and possession of the vessel
1. Ship owner or ship agent 2. Charterer may subcharter entire vessel to 3rd person only if
2. Charterer not prohibited in original charter. (Art.679)
 Classes: 3. Ship agent if authorized by the owner/s or given such power
1. Bareboat or demise – The charterer provides crew, food and fuel. in the certificate of appointment. (Art.598)
The charterer is liable as if he were the owner, except when the cause 4. Captain in the absence of the ship agent or consignee and
arises from the unworthiness of the vessel. The shipowner leases to only if he acts in accordance with the instructions of the
the charterer the whole vessel, transferring to the latter the entire agent or owner and protects the latter’s interests. (Art.609)
command, possession and consequent control over the vessel’s
navigation, including the master and the crew, who thereby become REQUISITES OF A VALID CHARTER PARTY
the charter’s servants. It transforms a common carrier into a private 1. Consent of the contracting parties
carrier. 2. Existing vessel which should be placed at the disposition of
 The charterer becomes the owner of the vessel pro hac vice, the shipper
just for that one particular purpose only. Because the charterer is 3. Freight
treated as owner pro hac vice, the charterer assumes the 4. Compliance with Art. 652 of the Code of Commerce
customary rights and liabilities of the shipowner to third persons
and is held liable for the expense of the voyage and the wages of Clauses Which May Be Included In a Charter Party
the seamen.
2. Contract of Affreightment – A contract whereby the owner of the Jason clause Clause paramount or
vessel leases part or all of its space to haul goods for others. paramount clause
 The shipowner retains the possession, command and
A stipulation in a charter party A clause in a charter party
navigation of the ship, the charterer merely having use of the
that in case of a maritime providing that the COGSA shall
space in the vessel in return for his payment of the charter hired.
accident for which the shipowner apply, even though the
 Kinds:
is not responsible by law, contract transportation is domestic,
a. Time charter – vessel is chartered for a fixed period of time
or otherwise, the cargo shippers, subject to the extent that any
or duration of voyage.
consignees or owners shall term of the bill of lading is
b. Voyage or trip charter – the vessel is leased for one or series
contribute with the shipowner in repugnant to the COGSA or
of voyages usually for purposes of transporting goods for
general average. (Pandect of applicable law, then to the extent
charterer.
Commercial Law and thereof the provision of the bill of
Jurisprudence, Justice Jose Vitug, lading is void. (Pandect of
LEASE CHARTER PARTY 1997 ed.) Commercial Law and
If for a definite period, lessee Charterer may rescind charter Jurisprudence, Justice Jose Vitug,
cannot give up the lease by party by paying half of the 1997 ed.)
paying a portion of the amount freightage agreed upon.
agreed upon.
If the leased property is sold to The new owner is not compelled Rights and Obligations of Parties
one who knows of the existence to respect the charter party so
of the lease, the new owner must long as he can load the vessel SHIPOWNER OR SHIP AGENT CHARTERER
respect the lease. with his own cargo. (Art. 689) 1. If the vessel is chartered 1. To pay the agreed charter
Civil law concept Commercial law concept wholly, not to accept cargo from price;
others; 2. To pay freightage on
2. To observe represented unboarded cargo;
capacity; 3. To pay losses to others for
CHARTER PARTY BILL OF LADING 3. To unload cargo loading uncontracted cargo and
An entire or complete contract. More like a private receipt which clandestinely placed illicit cargo;
the captain gives to accredit 4. To substitute another vessel 4. To wait if the vessel needs
goods received from persons if load is less than 3/5 of repair;
Consensual contract Real contract capacity; 5. To pay expenses for
5. To leave the port if the deviation. (Arts. 679-687)
charterer does not bring the
cargo within the lay days and
extra lay days allowed; LOAN ON BOTTOMRY LOAN ON RESPONDENTIA
6. To place in a vessel in a Definition
condition to navigate; Loan made by shipowner or ship Loan taken on security of the
7. to bring cargo to nearest agent guaranteed by vessel itself cargo laden on a vessel, and
neutral port in case of war or and repayable upon arrival of repayable upon safe arrival of
blockade. (Arts. 669-678) vessel at destination. (Art. 719) cargo at destination. (Art. 719)

Who may contract

Rescission of a Charter Party Shipowner or ship agent. Outside Only the owner of the cargo.
At charterer’s At shipowner’s Fortuitous causes of the residence of the owners -
request request (Art. 690) the captain.
(Art 688) (Art. 689)
Common elements:
1. By abandoning the 1. If the extra lay 1. War or interdiction 1. Exposure of security to marine peril;
charter and paying days terminate of commerce; 2. Obligation of the debtor conditioned only upon safe arrival of the
half of the without the cargo 2. Blockade; security at the point of destination.
freightage; being placed 3. Prohibition to
Forms:
2. Error in tonnage or alongside the vessel; receive cargo;
1. Public instrument
flag; 2. Sale by the owner 4. Embargo; and
2. Policy signed by the contracting parties and the broker taking part
3. Failure to place of the vessel before 5. Inability of the
therein
the vessel at the loading by the vessel to navigate.
3. Private instrument (Art. 720)
charterer’s disposal; charterer;
Contents:
4. Return of the
1. Kind, name and registry of the vessel;
vessel due to pirates,
2. Name, surname and domicile of the captain;
enemies or bad
3. Names, surnames and domiciles of the borrower and the lender;
weather;
4. Amount of the loan and the premium stipulated;
5. Arrival at a port
5. Time for repayment;
for repairs.
6. Goods pledged to secure repayment;
7. Voyage during which the risk is run (Art.721)
Terms:
1. Primage - bonus to be paid to the captain after the successful
voyage.
2. Demurrage – the sum fixed in the charter party as a
remuneration to the owner of the ship for the detention of his BOTTOMRY/ RESPONDENTIA ORDINARY LOAN (MUTUUM)
vessel beyond the number of days allowed by the charter party
Not subject to Usury Law Subject to Usury Law
for loading or unloading or for sailing.
3. Deadfreight – the amount paid by or recoverable from a charterer
Liability of the borrower is Not subject to any contingency
of a ship for the portion of the ship’s capacity the latter
contingent on the safe arrival of (absolute liability)
contracted for but failed to occupy.
the vessel or cargo at destination
4. Lay Days - days allowed to charter parties for loading and
unloading the cargo. The last lender is a preferred The first lender is a preferred
5. Extra Lay Days – days which follow after the lay days have creditor creditor
elapsed.

USUAL FORMS OF CONSUMMATING CONTRACTS WHEN LOAN ON BOTTOMRY OR RESPONDENTIA REGARDED

1. C.I.F. – cost, insurance and freight; AS SIMPLE LOAN
2. F.O.B. - free on board; 1. Lender loaned an amount larger than the value of the object
3. F.A.S. - free alongside ship; and due to fraudulent means employed by the borrower.
4. C. & F. - cost and freight. (ART.726)
2. Full amount of the loan is not used for the cargo or given on
TRANSSHIPMENT OF GOODS the goods if all of them could not have been loaded, the
 The act of taking cargo out of one ship and loading it in another, or balance will be considered a simple loan. (ART.727)
the transfer of goods from the vessel stipulated in the contract of 3. If the effects on which the money is taken is not subjected
affreightment to another vessel before the place of destination named to any risk. (ART.729)
in the contract has been reached, or the transfer for further
transportation from one ship or conveyance to another. Note: Under existing laws, the parties to a loan, whether ordinary or
 It is not dependent on the ownership of the transporting ships or in maritime, may agree on any rate of interest. (CB Circular 905)
the change of carriers, but rather on the fact of actual physical transfer
of cargo from one vessel to another.
 If done without legal excuse, however competent and safe the MARINE INSURANCE LOAN ON BOTTOMRY OR
vessel into which the transfer is made, is a violation of contract and RESPONDENTIA
infringement of right of shipper and subjects carrier to liability if freight Indemnity is paid after the loss has Indemnity is paid in advance
is lost event by cause otherwise excepted. (Magellan Manufacturing vs. occurred by way of a loan
CA, 201 SCRA 102) In case of loss of the vessel due to a In case of loss of the vessel
risk insured against, the obligation of due to a marine peril, the
LOAN ON BOTTOMRY AND RESPONDENTIA the insurer becomes absolute obligation of the borrower to
 A real, unilateral, aleatory contract, by virtue of which one person pay is extinguished
lends to another a certain amount of money or goods on things Consensual contract Real contract
exposed to maritime risks, which amount, with its earnings, is to be
returned if the things are safely transported, and which is lost if the Hypothecary Nature of Bottomry/ Respondentia
latter are lost. GENERAL RULE: The obligation of the borrower to pay the loan is
extinguished if the goods given as security are absolutely lost by
reason of an accident of the sea, during the voyage designated, and if average. (Art. 812)
it is proven that the goods were on board.  The insurers (Art.859) and
EXCEPTIONS: lenders on bottomry and
1. Loss due to inherent defect; respondentia shall likewise
2. Loss due to the barratry on the part of the captain; contribute. (Art.732).
3. Loss due to the fault or malice of the borrower; Number of interests involved
4. The vessel was engaged in contraband; and Only one interest involved Several interests involved
5. The cargo loaded on the vessel be different in from that agreed Share in the damage or expense
upon. 100% share In proportion to the value of the
owner’s property saved
Concurrence of Marine Insurance and Loan on Right to recover
Bottomry/Respondentia No reimbursement There may be reimbursement
1. The insurable interest of the owner of a ship hypothecated Kinds (not exclusive)
by bottomry is only the excess of the value over the amount
Art. 809 Art. 811
secured by bottomry. (Sec. 101, Insurance Code)
Procedure for recovery
2. The value of what may be saved in case of shipwreck shall
1. Assembly and deliberation
be divided between the lender and the insurer in proportion
2. Resolution of the captain
to the interest of each one. (Art. 735)
3. Entry of the resolution in the
logbook
Note: If a vessel is hypothecated by bottomry only the excess is
4. Detailed minutes
insurable, since a loan on bottomry partakes of the nature likewise of
5. Delivery of the minutes to
an insurance coverage to the extent of the loan accommodation. The
the maritime judicial authority of
same rule would apply to the hypothecation of the cargo by
the first port, within 24 hours
respondentia. (Pandect of Commercial Law and Jurisprudence, Justice
from arrival,
Jose Vitug, 1997 ed.)
6. Ratification by captain under
oath. (Arts. 813-814)
ACCIDENTS IN MARITIME COMMERCE
1. Averages
2. Arrival Under Stress GOODS NOT COVERED BY GENERAL AVERAGE EVEN IF
3. Collision SACRIFICED
4. Shipwreck 1. Goods carried on deck. (ART.855)
2. Goods not recorded in the books or records of the vessel.
AVERAGE (ART.855 (2))
 An extraordinary or accidental expense incurred during the voyage 3. Fuel for the vessel if there is more than sufficient fuel for the
in order to preserve the cargo, vessel or both, and all damages or voyage. (Rule IX, York-Antwerp Rule)
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 Jettison
consignment. (Art. 806)  Act of throwing cargo overboard in order to lighten the vessel.
 The person whose property has been saved must contribute to  Order of goods to be cast overboard:
reimburse the damage caused or expense incurred if the situation 1. Those which are on the deck, preferring the heaviest one
constitutes general average. with the least utility and value;
 Classes: 2. Those which are below the upper deck, beginning with the
1. Particular or Simple Average one with greatest weight and smallest value. (Art. 815)
2. Gross or General Average
 Where both vessel and cargo are saved, it is general average;  Jettisoned goods are not res nullius nor deemed “abandoned” within
where only the vessel or only the cargo is saved, it is particular the meaning of civil law so as to be the object of occupation by
average. salvage. (Pandect of Commercial Law and Jurisprudence, Justice Jose
 Expenses incurred to refloat a vessel, which accidentally ran Vitug, 1997 ed.)
aground, in order to continue its voyage, do not constitute general  In order that the jettisoned goods may be included in the gross or
average. Not only is there absence of a marine peril, common safety general average, the existence of the cargo on board should be proven
factor, and deliberateness. It is the safety of the property, and not the by means of the bill of lading. (Art. 816)
voyage, which constitutes the true foundation of general average. (A.
Magsaysay, Inc. vs. Agan, G.R.No. L-6393, Jan. 31, 1955) York-Antwerp (Y-A) Rules on Determining Liability for
Averages With Regard To Deck Cargo
1. Deck cargo is allowed only in domestic/coastwise/inter-island
shipping, and is prohibited in international/overseas/foreign shipping.
PARTICULAR OR SIMPLE GROSS OR GENERAL
2. If deck cargo is loaded with the consent of the shipper on
Definition
overseas trade, it must always contribute to general average, but
Damages or expenses caused to Damages or expenses
should the same be jettisoned, it would not be entitled to
the vessel or cargo that did not deliberately caused in order to
reimbursement because there is violation of the Y-A Rules.
inure to the common benefit, and save the vessel, its cargo or both
3. If deck cargo is loaded with the consent of the shipper on
borne by respective owners. (Art. from real and known risk. (Art.
coastwise shipping, it must always contribute to general average and if
809) 811)
jettisoned would be entitled to reimbursement.
Requisites  Reason: In domestic shipping, voyages are usually short and the
1. common danger; seas are generally not rough. In overseas shipping, the vessel is
2. deliberate sacrifice; exposed for many days to perils of the sea.
3. success;
4. proper formalities and legal
DOMESTIC INTERNATIONAL
steps.
Deck cargo is allowed Deck cargo is not allowed
Liability
With shipper’s consent
The owner of the goods which All the persons having an
General average Particular average
gave rise to the expense or interest in the vessel and the
suffered the damage shall bear cargo therein at the time of the Without shipper’s consent
this average. (Art. 810) occurrence of the average shall Captain is liable Captain is liable
contribute to satisfy this
ARRIVAL UNDER STRESS (ARRIBADA) other from opposite directions, or on intersecting lines, the
 The arrival of a vessel at the nearest and most convenient port steamship from the moment the sailing vessel is seen, shall watch
instead of the port of destination, if during the voyage the vessel with the highest diligence her course and movements so as to be
cannot continue the trip to the port of destination. able to adopt such timely means of precaution as will necessarily
prevent the two boats from coming in contact.
When lawful When unlawful Who bears 2. The sailing vessel is required to keep her course unless the
expenses: circumstances require otherwise.

The inability to 1. Lack of provisions The shipowner or Zones of Time in the Collision of Vessels
continue voyage is due to negligence to ship agent is liable in 1. First zone – covers all time up to the moment when risk of collision
due to lack of carry according to case of unlawful begins.
provisions, well- usage and customs; arrival under stress.  No rule is as yet applicable for none is necessary. Each vessel is
founded fear of 2. Risk of enemy But they shall not be free to direct its course as it deems best without reference to the
seizure, privateers, not well known or liable for the movements of the other vessel.
pirates, or accidents manifest damages caused by 2. Second zone – time between moment when risk of collision begins
of the sea disabling 3. Defect of vessel reason of a lawful and moment it becomes a practical certainty.
it to navigate. (Art. due to improper arrival. (Art. 821)  It is in this period where the vessel is required to keep away and
819) repair; and avoid the danger
4. Malice, 3. Third zone – time when collision is certain and time of impact.
negligence, lack of  An error in this zone would no longer be legally consequential.
foresight or skill of The vessel which has forced the privileged vessel into danger is
captain. (Art. 820) responsible even if the p.vessel committed an error within that zone.
 Error in Extremis - sudden movement made by a faultless vessel
 It is the duty of the captain to continue the voyage without delay during the third zone of collision with another vessel which is at fault
after the cause of the arrival under stress has ceased failing in such during the 2nd zone. Even if such sudden movement is wrong, no
duty renders him liable. However, in case the cause has been risk of responsibility will fall on said faultless vessel. (Urrutia and Co. v. Baco
enemies, there must first be an assembly before departure. (Art. 825) River Plantation Co., 26 PHIL 632)
 Steps:
1. Captain should determine during the voyage if there is well Cases Covered By Collision and Allision
founded fear of seizure, privateers and other valid grounds; 1. One vessel at fault
2. Captain shall assemble the officers and summon the persons  Vessel at fault is liable for damage caused to innocent vessel as well
interested in the cargo who may attend the meeting but as damages suffered by the owners of cargo of both vessels. (Art.
without a right to vote; 826)
3. The officers shall determine and agree if there is well- 2. Both vessels at fault
founded reason after examining the circumstances. The  Each vessel must bear its own loss, but the shippers of both vessels
captain shall have the deciding vote; may go against the shipowners who will be solidarily liable. (Art. 827)
4. The agreement shall be drafted and the proper minutes shall 3. Vessel at fault not known
be signed and entered in the log book;  Each vessel must bear its own loss, but the shippers of both vessels
5. Objections and protests shall likewise be entered in the may go against the shipowners who will be solidarily liable. (Art. 828)
minutes.  Doctrine of Inscrutable Fault – In case of collision where it
cannot be determined which between the two vessels was at
COLLISION fault, both vessels bear their respective damage, but both should
 Impact of two vessels both of which are moving. be solidarily liable for damage to the cargo of both vessels.
4. Third vessel at fault
Allision  The third vessel will be liable for losses and damages. (Art. 831)
 Impact between a moving vessel and a stationary one. 5. Fortuitous event/force majeure
 No liability. Each bears its own loss. (Art. 830)
Nautical Rules to Determine Negligence
1. When two vessels are about to enter a port, the farther one must  The doctrine of res ipsa loquitur applies in case a moving vessel
allow the nearer to enter first; if they collide, the fault is strikes a stationary object, such as a bridge post, dock, or navigational
presumed to be imputable to the one who arrived later, unless it aid. (Far Eastern Shipping v. CA, Luzon Stevedoring vs. CA)
can be proved that there was no fault on its part.
2. When two vessels meet, the smaller should give the right of way  Even if the cause of action against the common carrier is based on
to the larger one. quasi-delict, the defense of due diligence in the selection and
3. A vessel leaving port should leave the way clear for another supervision of employees is unavailing in case of a maritime tort
which may be entering the same port. resulting in collision. It is not a civil tort governed by the Civil Code but
4. The vessel which leaves later is presumed to have collided against a maritime one governed by Arts. 826-839 of the Code of Commerce.
one which has left earlier. (Manila Steamship vs. Insa Abdulhaman)
5. There is a presumption against the vessel which sets sail in the
night.  Doctrine of Last Clear Chance and Rule on Contributory Negligence
6. There is a presumption against the vessel with spread sails which cannot be applied in collision cases because of Art.827 of the Code of
collides with another which is at anchor and cannot move, even Commerce. (Notes and Cases on the Law on Transportation and Public
when the crew of the latter has received word to lift anchor, Utilities, Aquino, T. & Hernando, R.P. 2004 ed.)
when there was not sufficient time to do so or there was fear of a
greater damage or other legitimate reason. MARITIME PROTEST
7. There is a presumption against an improperly moored vessel.  Condition precedent or prerequisite to recovery of damages arising
8. There is a presumption against a vessel which has no buoys to from collisions and other maritime accidents.
indicate the location of its anchors to prevent damage to vessels  It is a written statement made under oath by the captain of a vessel
which may approach it. after the occurrence of an accident or disaster in which the vessel or
9. Vessels must have “proper look-outs” or persons trained as such cargo is lost or damaged, with respect to the circumstances attending
and who have no other duty aside therefrom. (Smith Bell v. CA) such occurrence, for the purpose of recovering losses and damages.
 Excuses for not filing protest: 1) where the interested person is not
Nautical Rules as to Sailing Vessel and Steamship on board the vessel; and 2) on collision time, need not be protested.
1. Where a steamship and a sailing vessel are approaching each (Art. 836)
 Cases applicable:
1. Collision (Art. 835);
2. Arrival under stress (Art. 612(8));
3. Shipwrecks (Arts. 612(15), 843);
4. Where the vessel has gone through a hurricane or when the
captain believes that the cargo has suffered damages or
averages (Art. 624).
 Who makes: Captain
 When made: within 24 hours from the time the collision took place.
 Before whom made: competent authority at the point of collision or
at the first port of arrival, if in the Philippines and to the Philippine
consul, if the collision took place abroad. (Art. 835)
SHIPWRECK
 It is the loss of the vessel at sea as a consequence of its grounding,
or running against an object in sea or on the coast. It occurs when the
vessel sustains injuries due to a marine peril rendering her incapable of
navigation.
 If the wreck was due to malice, negligence or lack of skill of the
captain, the owner of the vessel may demand indemnity from said
captain. (Art. 841)
 The rules on collision or allision, as may be pertinent, can equally
apply to shipwrecks.
SPECIAL CONCEPTS
ARRASTRE SERVICE
 A contract for the unloading of goods from a vessel.
 Applicability: Overseas trade only. (Commercial Law Review, C.
Villanueva, 2004 ed.)
 Significance: When a person brings in cargo from abroad, he
cannot unload and deliver the cargo by himself. The unloading must
be done by the arrastre operator, which will then deliver the cargo to
the importer. (Commercial Law Review, C. Villanueva, 2004 ed.)
 Nature of business: It is a public utility, discharging functions
which are heavily invested with public interest.
 Liability:
1. Similar to a warehouseman (Lua Kian v. Manila Railroad)
2. Similar to a common carrier (Northern Motors v. Prince Line)
3. Solidary liability with the common carrier
Note: In order that the arrastre operator may be held liable, the
consignee must prove that the damage was due to the negligence and
while the goods are in the custody of the arrastre operator. (Hartford
Fire Insurance v. E. Razon, Inc.)
STEVEDORING SERVICE
 The carriage of goods from the warehouse or pier to the holds of
the vessel. (Chief of Staff vs. CIR)
 As understood in the port business, the term consists of the
handling of cargo from the hold of the ship to the dock, in case of pier-
side unloading; or to a barge, in case of unloading at sea. (Anglo-Fil
Trading Corp. vs. Lazaro)
 The loading on the ship of outgoing cargo is also part of stevedoring
work. (Ibid.)
CONTAINERIZATION/ “SAID-TO-CONTAIN”/ “SHIPPER’S
LOAD AND COUNT” SYSTEM
 System whereby the shipper loads his cargoes in a specially
designed container, seals the container and delivers it to the carrier for
transportation. The carrier does not participate in the counting of the
merchandise for loading into the container, the actual loading, and the
sealing of the container. (US Lines v. Comm. Of Customs, ICTSI v.
Prudential Guarantee)
 The matter of quantity, description and conditions of the cargo
inside the container is the sole responsibility of the shipper, unless
there is stipulation to the contrary. (US Lines vs. Comm. Of Customs,
Reyma Brokerage v. Phil. Home Assurance)
Note: In order to attribute to the carrier any damage to the shipment
that may be found, inspection of the goods should be done at pier-
side. (Bankers vs. CA)
III. CARRIAGE OF GOODS BY SEA ACT/COGSA (C.A. No. 65)
APPLICABILITY
 The transportation must be:
1. Water/maritime transportation;
2. for the carriage of goods; and
3. overseas/international/foreign (from foreign port to
Philippine port).
 It can be applied in domestic sea transportation if agreed upon by
the parties. (Clause paramount or paramount clause)
IMPORTANT FEATURES:
1. Amount of carrier’s liability
2. Notice of damage
3. Prescriptive period
AMOUNT OF CARRIER’S LIABILITY
 Under the Sec. 4(5), the liability limit is set at $500 per package or
customary freight unit unless the nature and value of such goods is
declared by the shipper. This is deemed incorporated in the bill of
lading even if not mentioned in it. (Eastern Shipping vs. IAC, 150 SCRA
463)
 Note that Art. 1749, NCC applies to domestic/inter-island/coastwise
trade.
NOTICE OF DAMAGE (SEC. 3(6))
 Rules:
a. Patent damage: shipper should file a claim with the carrier
immediately upon delivery
b. Latent damage: shipper should file a claim with the carrier within
three days from delivery.
Note: The filing of a notice of claim is not a condition precedent.
PRESCRIPTIVE PERIOD
 Action for loss or damage to the cargo should be brought within one
year after:
a. Delivery of the goods (delivered but damaged goods); or
b. The date when the goods should have been delivered (non-
delivery). (Sec. 3[6])
 “Loss or Damage” as applied to the COGSA contemplates a situation
where no delivery at all was made by the shipper of the goods
because the same had perished, gone out of commerce, or
disappeared in such a way that their existence is unknown or they
cannot be recovered. Thus, it is inapplicable in case of misdelivery or
conversion. (Ang vs. American Steamship Agencies Inc.) and damage
arising from delay or late delivery (Mitsui O.S.K. Lines Ltd. vs. CA). In
such instance the, Civil Code rules on prescription shall apply.
 The one-year prescriptive period is suspended by:
1. The express agreement of the parties (Universal Shipping
Lines, Inc. vs. IAC, 188 SCRA 170)
2. The filing of an action in court until it is dismissed. (Stevens
& Co. vs. Nordeutscher Lloyd, 6 SCRA 180)
 The one-year period shall run from delivery of the last package and
is not suspended by extrajudicial demand. (Dole Phils.,Inc. vs.
Maritime Co.,148 SCRA 118)
 The one-year period shall run from delivery to the arrastre operator
and not to the consignee. (Union Carbide Phils, Inc. vs. Manila
Railroad Co.,SCRA 359)
 The insurer exercising its right of subrogation is bound by the one-
year prescriptive period. However, it does not apply to the claim
against the insurer for the insurance proceeds. (Fil. Merchants Ins.
Co. vs. Alejandro; Mayer Steel Pipe Corp. vs. CA)