Contract of Transportation

8/6/2019 Contract of Transportation

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San Beda College of Law 54 M EMORY A ID IN C OMMERCIAL LAW

C OMMERCIAL LAW C OMMITTEE C HAIRPERSON : Garny Luisa Alegre ASST. C HAIRPERSON :Jayson OS Ramos EDP: Beatrix I. Ramos SUBJECT HEADS:

Marichelle De Vera (Negotiable Instruments Law); Jose Fernando Llave (Insurance); Aldrich Del Rosario (TransportationLaws);Shirley Mae Tabangcura, Bon Vincent Agustin (Corporation Law); Karl Steven Co (Special Laws); John Lemuel Gatdula

(Banking Laws); Robespierre C U (Law on Intellectual Property)

CONTRACT OF TRANSPORTATION/ CARRIAGE A contract whereby a person, natural or

juridical, obligates to transport persons,goods, or both, from one place to another, byland, air or water, for a price or compensation.

Classifications:1. Common or Private2. Goods or Passengers3. For a fee (for hire) or Gratuitous4. Land, Water/maritime, or Air5. Domestic/inter-island/coastwise or

International/foreignIt is a relationship which is imbued with the

public interest.

COMMON CARRIER Persons, corporations, firms or associations

engaged in the business of carrying ortransporting passengers or goods or both, byland, water, or air, for compensation, offeringtheir services to the public (Art. 17 32, CivilCode).

Art. 17 32 of the New Civil Code avoids anydistinction between one whose principalbusiness activity is the carrying of persons orgoods or both and one who does suchcarrying only as an ancillary activity (sideline).It also avoids a distinction between a personor enterprise offering transportation service ona regular or scheduled basis and one offeringsuch service on an occasional, episodic orunscheduled basis.

Neither does the law distinguish betweena carrier offering its services to the generalpublic that is the general community orpopulation and one who offers services orsolicits business only from a narrow segment of the general population.

A person or entity is a common carriereven if he did not secure a Certificate of PublicConvenience (De Guzman vs. C A, 168 SCR A61 2).

It makes no distinction as to the means of transporting, as long as it is by land, water orair. It does not provide that thetransportation should be by motor vehicle.(First Philippine Industrial Corporation vs. C A)

One is a common carrier even if he has nofixed and publicly known route, maintains no

terminals, and issues no tickets (AsiaLighterage Shipping, Inc. vs. C A). Characteristics:

1. Undertakes to carry for all peopleindifferently and thus is liable forrefusal without sufficient reason(Lastimoso vs. Doliente, October 20,1961 );

2. Cannot lawfully decline to accept aparticular class of goods for carriage

to the prejudice of the traffic in thesegoods;

3. No monopoly is favored (BatangasTrans. vs. Orlanes, 52 PHIL 455);

4. Provides public convenience.

PRIVATE CARRIER One which, without being engaged in the

business of carrying as a public employment,undertakes to deliver goods or passengers forcompensation. (Home Insurance Co. vs.

American Steamship Agency, 23 S CR A 24)

TESTS WHETHER CARRIER ISCOMMON OR PRIVATE:

The S C in First Philippine IndustrialCorporation vs. C A ( 199 5) reiterated thefollowing tests:

1. It must be engaged in the business

of carrying goods for others as apublic employment and must holditself out as ready to engage in thetransportation of goods generally asa business and not as a casualoccupation;

2. It must undertake to carry goods of the kind to which its business inconfined;

3. It must undertake to carry by themethod by which his business isconducted and over its establishedroads; and

4. The transportation must be for hire.In National Steel Corp. vs. C A ( 1997 ) the S C

held that the true test of a common carrier isthe carriage of goods or passengers providedit has space for all who opt to availthemselves of its transportation for a fee.

COMMON CARRIER PRIVATECARRIER

1. As to availabilityHolds himself out forall peopleindiscriminately

Contracts withparticular individualsor groups only

2. As to required diligenceExtraordinarydiligence is required

Ordinary diligence isrequired

3. As to regulationSubject to Stateregulation

Not subject to Stateregulation

4. S tipulation limiting liabilityParties may not agreeon limiting thecarrier s liabilityexcept when providedby law

Parties may limit thecarrier s liability,provided it is not contrary to law,morals or good


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customs5. Exempting circumstance

Prove extraordinarydiligence and Art.17 33, N CC

caso fortuito, Art.117 4 N CC

6.Presumption of negligenceThere is apresumption of fault or negligence

No presumption of fault or negligence

7.Governing lawLaw on commoncarriers

Law on obligationsand contracts

GOVERNING LAWS A. Domestic/inter-island/coastwise

Applicable to Land, Water, and Airtransportation

1. Civil Code - primary2. Code of Commerce (Arts. 34 9, 3 79 ,

573- 734, 5 80, 806-845) - suppletory

B. International/foreign/overseas(Foreign country to Philippines)

Applicable to Water/maritime and Airtransportation

The law of the country of destinationgenerally applies.

1. Civil Code - primary2. Code of Commerce - suppletory3. Others - suppletory

a. W ater/maritime: Carriage of Goodsby Sea Act ( COGSA)

b. Air: Warsaw Convention

I. NEW CIVIL CODE(Arts. 1732-1766)

REQUIREMENT OF EXTRAORDINARYDILIGENCE

Rendition of service with the greatest skilland utmost foresight. (Davao Stevedore Co. v.Fernandez)

Rationale:1. From the nature of the business and

for reasons of public policy (Art.17 33)

2. Relationship of trust 3. Business is impressed with a special

public duty4. Possession of the goods5. Preciousness of human life

A common carrier is not an absolute insurerof all risks of travel.

COVERAGE1. Vigilance over goods (Arts. 17 34- 17 54);and2. Safety of passengers (Arts. 17 55- 176 3).

PASSENGERA person who has entered into a contract of

carriage, express or implied, with the carrier.They are entitled to extraordinary diligencefrom the common carrier.

The following are not consideredpassengers, and are entitled to ordinarydiligence only:

a. One who has not yet boarded anypart of a vehicle regardless of whether or not he has purchased aticket;

b. One who remains on a carrier for anunreasonable length of time after hehas been afforded every safeopportunity to alight;

c. One who has boarded by fraud,stealth, or deceit;

d. One who attempts to board a movingvehicle, although he has a ticket,unless the attempt be with theknowledge and consent of thecarrier;

e. One who has boarded a wrongvehicle, has been properly informedof such fact, and on alighting, isinjured by the carrier;

f. Invited guests and accommodationpassengers. (Lara vs. Valencia)

g. One who rides any part of the vehiclewhich is unsuitable or dangerous orwhich he knows is not designed orintended for passengers.

DEFENSES OF A COMMON CARRIER INTHE CARRIAGE OF GOODS1. C ASO FORTUITO/FORCE MAJEURE

Requisites: a. Must be the proximate and onlycause of the lossb. Exercise of due diligence to prevent or minimize the loss before, during orafter the occurrence of the disaster (Art.17 39)c. Carrier has not negligently incurred indelay in transporting the goods (Art.17 40)

Fire is not considered a natural disaster orcalamity as it arises almost invariably fromsome act of man. (Eastern Shipping Lines Inc.vs. IA C)

Mechanical defects are not force majeure if the same was discoverable by regular andadequate inspections. (Notes and Cases onthe Law on Transportation and Public Utilities,

Aquino, T. & Hernando, R.P. 2004 ed. p.120-122)

2. ACT S OF PUBLIC ENEMY Requisites:


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a. Must be the proximate and onlycause of the lossb. Exercise of due diligence to prevent or minimize the loss before, during orafter the act causing the loss,deterioration or destruction of the goods(Art. 17 39)

3. NEGLIGENCE OF THE SHIPPE R OR OWNER a. Sole and proximate cause: absolute

defenseb. Contributory: partial defense. (Art.

17 41)

4. CHAR ACTER OF THE GOODS OR DEFECTSIN THE PACK ING OR IN THE CONTAINER

Even if the damage should be caused by theinherent defect/character of the goods, thecommon carrier must exercise due diligence toforestall or lessen the loss. (Art. 17 42)

The carrier which, knowing the fact of improper packing of the goods upon ordinaryobservation, still accepts the goodsnotwithstanding such condition, is not relievedof liability or loss or injury resulting therefrom.(Southern Lines, Inc. v. C A, 4 S CR A 25 8)

5. O RDER OR ACT OF PUBLIC AUTHORITY Said public authority must have the power

to issue the order (Art. 17 43). Consequently,where the officer acts without legal process,the common carrier will be held liable.(Ganzon v. C A 161 SCR A 646)

Diligence in the selection and supervision of

employees under Article 2 18 0 of the Civil Codecannot be interposed as a defense by thecommon carrier because the liability of thecarriers arises from the breach of the contract of carriage. The defense under said articles isapplicable to negligence in quasi-delicts under

Art. 2 176 . (Del Prado v. Manila Electric Co., 52Phil 900)

LIABILITY OF A COMMON CARRIER FORDEATH OR INJURIES TO PASSENGERSDUE TO ACTS OF ITS EMPLOYEES ANDOTHER PASSENGERS OR STRANGERS

FOR ACTS OF ITSEMPLOYEES

FOR ACTS OFOTHER

PASSENGERS ORSTRANGERS

Required diligence and defenseExtraordinarydiligence

Ordinary diligence

Nature of liabilityTort; however,The employee must be on duty at the timeof the act. (Marananv. Perez)

Not absolute; limitedby Art. 176 3

The carrier is liable when its personnelallowed a passenger to drive the vehiclecausing it to collide with another vehicleresulting to the injuries suffered by the otherpassengers. (M RR vs. Ballesteros, 16 SCR A641)

CARRIAGE OF GOODS CARRIAGE OF PASSENGERS

Parties1. Common carrier2. Shipper3. Consignee

1. Common carrier2. Passenger

Cause of liabilityDelay in delivery, loss, destruction, ordeterioration of the goods

Death or injury to the passengers

Duration of liability

From the time the goods are unconditionallyplaced in the possession of, and received by thecarrier for transportation until the same aredelivered actually or constructively by the carrier

to the consignee or to the person who has theright to receive them. (Art. 17 36)

It remains in full force and effect even whenthey are temporarily unloaded or stored in transit unless the shipper or owner has made use of theright of stoppage in transitu. (Art. 17 37)

It continues to be operative even during thetime the goods are stored in a warehouse of thecarrier at the place of destination until the

The duty of a common carrier to provide safetyto its passengers so obligates it not only duringthe course of the trip, but for so long as thepassengers are within its premises and where

they ought to be in pursuance to the contract of carriage. (L RTA v. Navidad, [2003])

All persons who remain on the premiseswithin a reasonable time after leaving theconveyance are to be deemed passengers, andwhat is a reasonable time or a reasonable delaywithin this rule is to be determined from all thecircumstances, and includes a reasonable timeto see after his baggage and prepare for his


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consignee has bee advised of the arrival of thegoods and has had reasonable opportunitythereafter to remove them or otherwise disposeof them. (Art. 17 38)

Delivery of goods to the custom authorities isnot delivery to the consignee. (Lu Do v.Binamira, 101 Phil 120)

departure. (La Mallorca v. C A, 17 SCR A 739 ; Abiotiz Shipping Corporation v. C A, 179 SCR A95)

It is the duty of common carriers of passengers to stop their conveyances areasonable length of time in order to affordpassengers an opportunity to enter, and theyare liable for injuries suffered from the suddenstarting up or jerking of their conveyances whiledoing so. The duty which the carrier of passengers owes to its patrons extends topersons boarding the cars as well as to thosealighting therefrom (Dangwa Trans Co., Inc. vs.C A 202 S CR A 5 74).

Presumption of negligence

Art. 17 35 Civil CodeReason: As to when and how goods weredamaged in transit is a matter peculiarly withinthe knowledge of the carrier and its employees.

(Mirasol v. Dollar, 53 PHIL 124)Mere proof of delivery of goods to a carrier ingood order and the subsequent arrival of thesame goods at the place of destination in badorder makes for a prima facie case against thecarrier. ( Coastwise Lighterage Corp. v. C A, 245SCR A 796 )

Art. 17 55 Civil CodeReason: The contract between the passengerand the carrier imposes on the latter the dutyto transport the passenger safely; hence the

burden of explaining should fall on the carrier.

Defenses

1. Ordinary circumstance: Exercise of extraordinary diligence (Art. 17 35)

2. Special circumstances:a. Flood, storm, earthquake, lighting,

or other natural disaster orcalamity (plus force majeure)

b. Act of the public enemy in war,whether international or civilc. Act or omission of the shipper or

the owner of goodsd. The character of the goods or

defects in the packing or in thecontainers

e. Order or act of competent publicauthority (Art. 17 34)

1. Exercise of extraordinary diligence(Art. 17 56)

2. Caso fortuito


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Valid stipulations

1. Reduction of degree of diligence to ordinarydiligence, provided it be:

a) In writing, signed by the shipper orowner;

b) Supported by a valuable considerationother than the service rendered by thecarriers; and

c) Reasonable, just and not contrary topublic policy. (Art. 17 44)

2. Fixed amount of liability: A contract fixing thesum to be recovered by the owner or shipper forthe loss, destruction or deterioration of thegoods, if it is reasonable and just under thecircumstances and has been fairly and freelyagreed upon. (Art. 17 50)3. Limited liability for delay: An agreement limiting the common carrier s liability for delay onaccount of strikes or riots (Art. 17 48)4. Stipulation limiting liability to the value of thegoods appearing in the bill of lading, unless theshipper or owner declares a greater value. (Art.17 49)

The diligence required in the carriage of thegoods may be reduced by only one degree, fromextraordinary to ordinary diligence or diligence of a good father of a family. (Art. 17 44, Art. 17 45,no. 4)

Stipulation limiting liability when a passenger iscarried gratuitously, but not for willful acts orgross negligence. (Art. 17 58)

Void stipulations

1. That the goods are transported at the riskof the owner or shipper;2. That carrier will not be liable for any loss,

destruction or deterioration of the goods;3. That the carrier need not observe anydiligence in the custody of the goods;4. That the carrier shall exercise a degree of diligence less than that of a good father of afamily over the movable transported;5. That the carrier shall not be responsible forthe acts or omissions of his or its employees;6. That the carrier s liability for actscommitted by thieves or robbers who do not act with grave or irresistible threat, violence orforce is dispensed with or diminished;7. That the carrier is not responsible for theloss, destruction or deterioration of the goodson account of the defective condition of the car,

vehicle, ship or other equipment used in thecontract of carriage. (Art. 17 45)

Dispensing with or lessening the extraordinaryresponsibility of a common carrier for the safetyof passengers imposed by law by stipulation, by

posting of notices, by statements on tickets orotherwise. (Art. 17 57)


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C OMMERCIAL LAW C OMMITTEE C HAIRPERSON: Garny Luisa Alegre ASST. C HAIRPERSON:Jayson OS Ramos EDP: Beatrix I. Ramos SUBJECT HEADS:

Marichelle De Vera (Negotiable Instruments Law); Jose Fernando Llave (Insurance); Aldrich Del Rosario (Transportation Laws);Shirley Mae Tabangcura, Bon Vincent Agustin (Corporation Law); Karl Steven Co (Special Laws); John Lemuel Gatdula (Banking Laws);Robespierre C U (Law on Intellectual Property)

RULES ON PASSENGERS BAGGAGEIN THE CUSTODY OF

THE PASSENGERS(HAND-CARRIED)

IN THE CUSTODYOF THE COMMON

CARRIER(CHECKED-IN)

Legal nature of the baggageNecessary deposit Considered as

goodsRequired diligence by the common

carrierDiligence of adepositary (ordinarydiligence)

Extraordinarydiligence

Applicable rules Arts. 1998 and 2000-2003

Arts. 1733-1753

CONCURRING CAUSES OF ACTION ARISING FROM THE NEGLIGENT ACT OF THE COMMON CARRIER1. Cu lpa contract u al (breach of contract)

Only the carrier is primarily liable and not the driver, because there is no privity between the driver and the

passenger.Basis: Art. 1759, NCC.No defense of due diligence in the selection and supervision of employees.

2. Culpa aquiliana (quasi-delict)The carrier and driver are solidarily liable as joint tortfeasors.Basis: Art. 2 180, NCC.Defense of due diligence in the selection and supervision of employees is available. Exception: maritime tort

resulting in collision. (See notes on Collision)

3. C ulpa criminal (crimin al neg li gence) 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 thedriver of another vehicle, the drivers as well as the owners of the two vehicles are jointly and severally liable fordamages. It makes no difference that the liability of the bus driver and owner springs from contract while that of theowner and driver of the other vehicle arises from quasi-delict. (Fabre vs. C A)

LIMITATIONS AS TO CARRIER S LIABILITY I NVALID AS BEING

CONTRARY TOPUBLIC POLICY

VALID &ENFORCEABLE

1. One exempting thecarrier from any andall liability for loss ordamage occasioned byits own negligence.

2. An unqualifiedlimitation of liability toan agreed valuation.

1. One limiting theliability of the carrierto an agreedvaluation, unless theshipper declares a

higher value andpays a higher rateof freight (H.E. HeacockCompany vs.Macondray & Company Inc.)

However, the carrier cannot limit its liability for injury to, or loss of, goods shipped where such injury or loss was


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caused by its own negligence.(Shewaram vs. PAL, 17 SCR A 606)

SPECIAL RULES ON LIABILITES OF AIRLINE CARRIERS1. In case of flight diversion due to bad weather or other circumstances beyond the pilot s control, the relationbetween the carrier and the passenger continues until the latter has been landed at the port of destination and hasleft the carrier s premises. The carrier should necessarily exercise extraordinary diligence in safeguarding the comfort,convenience and safety of its stranded passengers until they have reached their final destination. (Philippine Airlinesvs. C A, 22 6 SCR A 423)2. Even where overbooking of passengers is allowed as a commercial practice, the airline company would still beguilty of bad faith and still be liable for damages if it did not properly inform passenger that it could breach thecontract of carriage even if they were confirmed passengers. (Zalamea vs. C A, 22 8 SCR A 23)3. An open-dated ticket constitutes a complete contract between the carrier and passenger. Hence, the airlinecompany is liable if it refused to confirm a passenger s flight reservation. (Singson vs. C A, 2 82 SCR A 149)4. An airline company which issued a confirmed ticket to a passenger covering successive trips on different airlinescan be held liable for damages occasioned by bumping off by one of the successive airlines. (Lufthansa German

Airlines vs. C A, 23 8 SCR A 290)5. An airline ticket providing that carriage by successive air carriers is to be regarded as a single operation is tomake the issuing carrier liable for the tortuous conduct of the other carrier. A printed provision in the ticket limitingliability only to its own conduct is not enough to rebut that liability. ( K LMRoyal Dutch Airlines vs. C A, 65 SCR A 23 7)

II. CODE OF COMMERCE

A. OVERLAND TRANSPORTATION(Arts. 349-379)

Applicability1. Domestic land and water/maritime transportation. (Pandect of Commercial Law and J u rispr u dence, J u stice Jose

Vit ug, 1997 ed.)2. Domestic Air Transportation. (Commercial Law Review , Cesar Villan u eva , 2004 ed.)

IMPORTANT CONCEPTS:1. Bill of lading2. Obligations of the carrier3. Right of abandonment 4. Notice of damage5. Combined carrier agreement

BILL OF LADING The written acknowledgment of receipt of goods and agreement to transport them to a specific place to a person

named or to his order.R u les:

1. It is not indispensable for the creation of a contract of carriage. ( Compania Maritima vs. Ins u rance Company of North America, 12 SCRA 213)

2. Ambiguity is construed against the carrier, the contract being one of adhesion.

3. The consignee, although the instrument is oftentimes drawn up only by the consignor and carrier, becomes boundby all the stipulations contained therein by making a claim for loss on the basis of said bill of lading. (Sea-LandServices Inc. vs. IA C)

4. The right of a party to recover for loss of shipment consigned to him under a bill of lading drawn up only by andbetween the shipper and the carrier, springs from either a relation of agency between him and the shipper, or hisstatus as stranger in whose favor some stipulation is made in said contract, and who becomes a party thereto whenhe demands fulfillment of that stipulation. (Art. 1311 (2), (Mendoza vs. PAL Inc.)

5. Acceptance of the bill of lading without dissent raises the presumption that all the terms therein where brought tothe knowledge of the shipper and agreed to by him and, in the absence of fraud or mistake; he is estopped from


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thereafter denying that he assented to such terms. (Notes and Cases on the Law on T rans p ortation and Pub l icUtil ities , Aquino, T . & Hernando , R.P. 2004 ed. p .261)

Kinds: 1. On board - issue d whe n the goo d s h a ve bee n a ctu a lly pla ced a board the ship with ve r y r ea son a ble

expect a tion th a t the shipme n t is a s goo d a s o n its w a y.2. Receive d - o n e i n which it is st a te d th a t the goo d s h a ve bee n r eceive d for shipme n t with o r without specifyi n g

the vessel by which the goo d s ar e to be shippe d .3. Negoti a ble - o n e in which it is st a te d th a t the goo d s r efe rr ed to the r ein will be d eliver ed to the be ar er or to the

ord er of a n y pe r son n a me d the r ein .4. Non -n egoti a ble - On e i n which it is st a te d th a t the goo d s r efe rr ed to the r ein will be d eliver ed to a specifie d

per son .5. Clea n On e which do es n o t in d ica te a n y d efect i n the g ood s.6. Fo ul On e which c o n t a in s a n o t a tio n the r eo n in d ica tin g th a t the g ood s c o ver ed by it ar e in bad co n d itio n .

7. Spen t On e which c o ver s g ood s th a t a lr ead y h a ve bee n d eliver ed by the c arr ier witho ut a su rr en d er o f a sign ed co py o f the bill.

8. T hro ugh On e issue d by the c arr ier who is o bliged t o use the f a cilities o f o the r carr ier s a s well a s his o wn f a cilities f or the pu r po se o f t ra n sp or tin g the g ood s f ro m the city o f the selle r t o the city o f the buye r , which billo f lad in g is h o n or ed by the sec o n d a n d o the r in te r este d carr ier s wh o do n o t issue thei r o wn bills.

9. Cust od y On e whe r ein the g ood s ar e a lr ead y r eceive d by the c arr ier but the vessel i n d ica te d the r ein ha s n o t yet arr ived in the p or t.

10. Por t On e which is issue d by the c arr ier t o who m the g ood s h a ve bee n d eliver ed , a n d the vessel i n d ica te d in the bill o f lad in g by which the g ood s ar e t o be shippe d is a lr ead y i n the p or t whe r e the g ood s ar e hel d f or shipme n t.

Functions: 1. Best evidence of the existence of the contract of carriage of cargo (Art. 353)2. Document of tit le3. Receipt of cargo 4. Contract to transport and deliver goods as stipulated5. Symbol of the goods

OBLIGATIONS OF THE CARRIER A. Duty to accept the goods

GENE RAL RULE: A common carrier cannot ordinarily refuse to carry a particular class of goods. EX C EP TI O N: For some sufficient reason the discrimination against the traffic in such goods is reasonable and

necessary. (Fisher vs. Yangco Steamship Co. 3 1 P hil 1). I nstances when the carrier may validly refuse to accept the goods include the ff :

1.) G oods sought to be transported are dangerous objects, or substances including dynamite and other explosives2.) G oods are unfit for transportation3.) Acceptance would result in overloading4.) Contrabands or illegal goods5.) G oods are injurious to health6.) G oods will be exposed to untoward danger like flood, capture by enemies and the like7.) G oods like livestock will be exposed to disease8.) Strike9.) Failure to tender goods on time. ( N otes and Cases on the Law on T ransportation and P ublic Utilities, Aquino, T . & Hernando, R. P . 2004 ed. p. 68)

I n case of carriage by railway, the carrier is exempted from liability if carriage is insisted upon by the shipper,

provided its objections are stated in the bill of lading. However, when a common carrier accepts cargo for shipment for valuable consideration, it takes the risk of

delivering it in good condition as when it was loaded. ( PAL vs. C A)

B. Duty to deliver the goodsNot only to transport the goods safely but to the person indicated in the bill of lading. The goods should be

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


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Time of deliveryStipulated in

Contract/Bill ofLading

No stipulation

1. Carrier is bound tofulfill the contract andis liable for any delay;no matter from what cause it may havearisen.

1. Within areasonable time.2. Carrier is bound toforward them in the1st shipment of thesame or similar goodswhich he may maketo the point of delivery. (A RT. 35 8 Code of Commerce)

Effects of delaya. Merely suspends and generally does not terminate the contract of carriageb. Carrier remains duty bound to exercise extraordinary diligencec. Natural disaster shall not free the carrier from responsibility (Art. 1740)d. If delay is without just cause, the contract limiting the common carrier s liability cannot be availed of in case of loss or deterioration of the goods (Art. 1747)

RIGHT OF CONSIGNEE TO ABANDON GOODS Instances:

1. Partial non-delivery, where the goods are useless without the others (Art. 3 63);2. Goods are rendered useless for sale or consumption for the purposes for which they are properly destined (Art.365); and3. In case of delay through the fault of the carrier (Art. 3 71).

NOTICE OF DAMAGE (ART. 366) Requisites for applicability:

1. Domestic/inter-island/coastwise transportation2. Land/water/air transportation3. Carriage of goods4. Goods shipped are damaged

Rules: a. Patent damage: shipper must file a claim against the carrier immediately upon delivery (it may be oral or written)b. Latent damage: shipper should file a claim against the carrier within 24 hours from delivery.Note: These rules does not apply to misdelivery of goods. ( Roldan vs. Lim Ponzo)

P urpos e of n otic e: To i n for m t he c arri er t ha t t he s hip me n t ha s bee n damaged, a n d it is c ha r ged w it h l i abi lit yt he r efor e, a n d to gi ve it an opportu n it y to make a n i n vesti gatio n an d fi x r espo n si bi lit y wh i le t he ma tt er is fr es h.

The fi li n g of n otic e of c lai m is a co n ditio n pr ec ede n t for r eco ver y.Short er p erio d may be stipu lat ed by t he p arti es bec aus e it mer ely a ff ects t he s hipp er s r emedy a n d d o es n ot

aff ect t he l i abi lit y of t he c arri er . ( P HILAMGEN vs . Swee t li n es , I n c .)Prescriptive Period

Not provided by Article 3 66. Thus, in such absence, Civil Code rules on prescription apply.If despite the notice of claim, the carrier refuses to pay, action must be filed in court.

1. No bill of lading was issued: within 6 years2. Bill of lading was issued: within 10 years.

ARTICLE 366 COGSA Sec.3 (6) Applicability

1. Domestic/inter-island/coastwisetransportation2. Land, water, airtransportation3. Carriage of goods

1. International/overseas/foreign(from foreigncountry to Phils.)Note: subject to therule on Paramount


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Clause2. Water/maritimetransportation3. Carriage of goods

Notice of damage1. Conditionprecedent 2. 24-hour period forclaiming latent damage

1. Not a conditionprecedent 2. 3-day period forclaiming latent damage

Prescriptive periodNone provided; CivilCode applies.

One year from thedate of delivery(delivered but damaged goods), ordate when thevessel left port orfrom the date of delivery to thearrastre (non-delivery or loss).

COMBINED CARRIER AGREEMENT (ART. 373) GENE R AL RULE: In case of a contract of transportation of several legs, each carrier is responsible for its particular

leg in the contract. EX C EP T IO N: A combined carrier agreement where a carrier makes itself liable assuming the obligations and

acquiring as well the rights and causes of action of those which preceded it.

B. MARITIME COMMERCE(Arts. 573-869)

IMPORTANT CONCEPTS:1. Merchant vessel2. Maritime lien and Preference of Credit

3.

Doctrine of limited liability4. Causes of revocation of voyage5. Participants in maritime commerce6. Charter party7. Loans on bottomry and respondentia8. Accidents in maritime commerce

MARITIME/ADMIRALTY LAWIt is the system of laws which particularly relates to the affairs and business of the sea, to ships, their crews and

navigation, and to maritime conveyance of persons and property. ( N otes and Cases on the L aw on T ransportationand P ublic Utilities, Aq uino & Hernando, citing Francisco, p.254)

Maritime laws apply only to maritime trade and sea voyages. ( P andect of Commercial L aw and Jurisprudence,Justice Jose Vitug, 1 997 ed.)

Arrastre service is not maritime in character. It refers to a contract for the unloading of goods from a vessel. (IC T SIvs. P rudential Guarantee, 320 SC R A 244)

CHARACTERISTICS OF MARITIME TRANSACTION1. Real - simi la r to tr a ns a ctions over re al property with respect to effectivity a ga inst third persons which is donethrough registr a tion. (Rubiso vs. River a , 3 7 Phil . 72). The evidence of re al na ture is shown by: 1) the l imit a tion of the l ia bil ity of the a gents to the a ctu al val ue of the vesse l a nd the freight money; a nd 2) the right to ret a in the c a rgoa nd emb a rgo a nd detention of the vesse l (Luzon Stevedoring Corp v. C A, 156 SCRA 169 );


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2. Hy poth ecary - th e lia bility o f th e o wne r o f th e v a lue o f th e vessel is limi t ed to th e vessel i t self (D octr ine o f L imit edL ia bility) .

The real and hypothecary nature of maritime law simply means that the liability of the carrier in connection withlosses 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. 2 17 SCR A 35 9).

MERCHANT VESSELVessel engaged in maritime commerce, whether foreign or otherwise. (Bar Review Materials in Commercial L aw,

Jorge Miravite, 2002 ed. ) Constitutes property which may be acquired and transferred by any of the means recognized by law. They shall

continue to be considered as personal property. (Arts. 5 73, 5 85 ) They are susceptible to 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 andsold. (Ship Mortgage Decree of 1978)

MARITIME LIENIt constitutes a present right of property in the ship, a jus in re, to be afterward enforced in admiralty by process in

rem. (PNB vs. C A, 33 7 SCR A 381)If the maritime lien arose prior to the recording of a preferred mortgage, it shall have priority over the said

mortgage lien. (PNB vs. C A, 33 7 SCR A 381)

ORDER OF PREFERENCE IN CASE OF SALE OF VESSEL

R.A. 6106 P.D. 1521Effectivity date

1969 1978 Applicability

Overseas shippingonly

Both domestic andoverseas shipping

Kind of saleJudicial Judicial and

extrajudicialOrder of Preference

A preferredmortgage shall havepriority over allclaims against thevessel, except thefollowingpreferences in theorder stated:1. Judicial costs of the proceedings;2. Taxes due thePhilippineGovernment;3. Salaries and

wages of the Captainand Crew of thevessel during its last voyage;4. General averageor salvage includingcontract salvage,bottomry loans, andindemnity due

The preferredmortgage lien shallhave priority over allclaims against thevessel, except thefollowingpreferences in theorder stated:1. Expenses andfees allowed andcosts taxed by thecourt and taxes dueto the Government;2. Crew s wages;

3. General average;4. Salvage, includingcontract salvage;5. Maritime liensarising prior in timeto the recording of the preferredmortgage;6. Damages arising


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shippers for thevalue of goodstransported but which were not delivered to theconsignee;5. Costs of repairand equipment of the vessel, andprovisioning of food,supplies and fuelduring its last voyage; and6. Preferredmortgagesregistered prior intime.

out of tort; and7. Preferredmortgage registeredprior in time.

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.

DOCTRINE OF LIMITED LIABILITY(HYPOTHECARY RULE)

Cases where applicable:1. Art. 5 87 civil liability for indemnities to third persons2. Art. 5 90 indemnities from negligent acts of the captain (not the shipowner or ship agent)3. Art. 837 collision4. 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

GENE R AL RULE: The liability of shipowner and ship agent is limited to the amount of interest in said vessel suchthat where vessel is entirely lost, the obligation is extinguished. (Luzon Stevedoring v. Escano, 156 SCR A 169) Theinterest extends to: 1) the vessel itself; 2) equipments; 3) freightage; and 4) insurance proceeds. ( Chua v. IA C, 166 SCR A 183)

EX C EP TI

O NS: 1. Claims under Workmen s Compensation (Abueg vs. San Diego 77 Phil 730);

2. Injury or damage due to shipowner or to the concurring negligence of the shipowner and the captain;3. The vessel is insured (Vasquez vs. C A 138 SCR A 553).4. Expenses for repair on vessel completed before loss;5. In case there is no total loss and the vessel is not abandoned;6. Collision between two negligent vessels;

Abandonment of the vessel is necessary to limit the liability of the shipowner. The only instance wereabandonment is dispensed with is when the vessel is entirely lost (Luzon Stevedoring vs. C A 156 SCR A 169 ).

RIGHT OF SHIPOWNER OR SHIP AGENT TO ABANDON VESSELInstances:

1. In case of civil liability from indemnities to third persons (Art. 5 87);2. In case of leakage of at least of the contents of a cargo containing liquids (Art. 687); and3. In case of constructive loss of the vessel (Sec. 138, Insurance Code).

RIGHT OF ABANDONMENT

SHIPOWNER ORSHIP AGENT

CONSIGNEE

What may be abandoned Vessel Goods shipped


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Instances1. In case of civilliability fromindemnities to thirdpersons (Art. 5 87);2. Sec. 138,Insurance Code;3. In case of leakageof at least of thecontents of a cargocontaining liquids(Art. 687)

1. Partial non-delivery, where thegoods are uselesswithout the others(Art. 3 63);2. Goods arerendered useless forsale or consumptionfor the purposes forwhich they areproperly destined(Art. 3 65); and3. In case of delaythrough the fault of the carrier (Art.371).

Effects1. Transfer of ownership of thevessel from theshipowner to theshippers or insurer.2. In case of (2), theinsurer must pay theinsured as if therewas actual total lossof the vessel.

1. Transfer of ownership on thegoods from theshipper to thecarrier.2. Carrier shouldpay the shipper themarket value of thegoods at the point of destination.

CAUSES OF REVOCATION OF VOYAGE1. War or interdiction of commerce;2. Blockade;3. Prohibition to receive cargo at destination;4. Embargo;5. Inability of the vessel to navigate. (Art. 640)

Terms:1. Interdiction of commerce A governmental prohibition of commercial intercourse intended to bring about an

entire cessation for the time being of all trade whatever.2. Blockade A sort of circumvallation of a place by which all foreign connection and correspondence is, as far as

human power can effect it, to be cut off.3. Embargo A proclamation or order of a state, usually issued in time of war or threatened hostilities, prohibiting

the departure of ships or goods from some or all the ports of such state until further order.

PARTICIPANTS IN MARITIME COMMERCE A. Shipowners and ship agentsB. Captains and masters of the vesselC. Officers and crew of the vesselD. SupercargoesE. Pilot

A. SHIPOWNERS AND SHIP AGENTSShipowner (proprietario)

Person who has possession, control and management of the vessel and the consequent right to direct hernavigation 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


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the shipowner.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 r equirements of navigation;4. Order a new voyage, make a new charter or insure the vessel after obtaining authorization from the shipowner or i f granted in

certificate of appointment.

Civil Liabilities of the Shipowner And Ship Agent1. All contracts of the captain, whether authorized or not, to repair, equip and provision the vessel; (Art. 5 86 )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. 5 87)

Duty of Ship Agent to Discharge the Captain and Members of the CrewIf the seamen contract is not for a definite period or voyage, he may discharge them at his discretion. (Art. 603)If for a definite period, he may not discharge them until after the fulfillment of their contracts, except on the following grounds:

a. Insubordination in serious matters;b. Robbery;c. Theft;d. Habitual drunkenness;e. Damage caused to the vessel or to its cargo through malice or manifest or proven negligence. (Art. 605)

B. CAPTAINS AND MASTERSThey 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;3. Representative of the government of the country under whose flag he navigates.

Qualifications:1. Filipino citizen;2. Legal capacity to contract;3. Must have passed the required physical and mental examinations required for licensing him as such. (Art. 609)

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 indiscipline;4. Make contracts for the charter of vessel in the absence of ship agent.5. Supply, equip, and provision the vessel; and6. 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. K eep 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 or 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 wreck;9. Hold in custody properties left by deceased passengers and crew members;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)


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

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 Cargoes1. 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 CREW1. Sailing Mate/First Mate2. Second Mate3. Engineers4. 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 o fficially declared an epidemic in the port of destination;3. If the vessel should change owner or captain. (Art. 647)

Sailing Mate/First MateSecond 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. K eep 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 MateTakes command of the vessel in case of the inability or disqualification of the captain and the sailing mate, assuming in such casetheir 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)

EngineersOfficers 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. K eep 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. K eep an Engine Book;6. Supervise all personnel maintaining the engine. (Art. 632)

CrewThe 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)


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Classes of Seaman s Contracts1. By the voyage;2. By the month; and3. By share of profits or freightage.

Just Causes for the Discharge of Seaman While Contract Subsists1. 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 wageb. if by voyage - half of amount if death occurs on voyage out; and full, if on voyage inc. 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. SUPERCARGOESPersons 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. PILOTA 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 orintoxicated (Far Eastern Shipping Company vs. C A). 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. ( N otes and Cases on the L aw on Transportation and Public Utilities, Aquino, T. & Hernando, R.P. 2004 ed. p. 518)

Liablity of Pilot GENE R AL RULE : On compulsory pilotage grounds, the Harbor Pilot is responsible for damage to a vessel or to life or property due

to his negligence. EX C E PT :

1. Accident caused by force majeure or natural calamity provided the pilot exercised prudence and extra diligence to prevent orminimize damages.2. Countermand or overrule by the master of the vessel in which case the registered owner of the vessel is liable. (Sec. 11 , Art.III

PP A Admin Order 03- 85)

SPECIAL CONTRACTS OF MARITIME COMMERCE

1. Charter party2. Bill of lading3. Contract of transportation of passengers on sea voyages4. Loan on bottomry5. Loan on respondentia6. Marine insurance

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. (Planters Products, Inc. vs. C A, 22 6 SCR A 4 76)


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Parties:1. Ship owner or ship agent 2. Charterer

Classes:1. Bareboat or demise The charterer provides crew, food and fuel. The charterer is liable as if he were the owner, except whenthe cause arises from the unworthiness of the vessel. The shipowner leases to the charterer the whole vessel, transferring to thelatter the entire command, possession and consequent control over the vessel s navigation, including the master and the crew, whothereby become the charter s servants. It transforms a common carrier into a private carrier.

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

2. Contract of Affreightment A contract whereby the owner of the vessel leases part or all of its space to haul goods for others. 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. K inds:

a. Time charter vessel is chartered for a fixed period of time or duration of voyage.b. Voyage or trip charter the vessel is leased for one or series of voyages usually for purposes of transporting goods for

charterer.

LEASE CHARTER PARTYIf for a definite period,lessee cannot give upthe lease by paying a

portion of the amount agreed upon.

Charterer may rescindcharter party by payinghalf of the freightage

agreed upon.If the leased property issold to one who knowsof the existence of thelease, the new ownermust respect the lease.

The new owner is not compelled to respect thecharter party so long ashe can load the vesselwith his own cargo. (Art.689 )

Civil law concept Commercial law concept

CHARTER PARTY BILL OF LADING An entire or completecontract.

More like a privatereceipt which thecaptain gives to accredit goods received frompersons

Consensual contract Real contract

BAREBOAT ORDEMISE CHARTER

CONTRACT OF AFFREIGHTMENT(TIME OR VOYAGE

CHARTER)Charterer becomesliable to others causedby its negligence

Owner remains liable ascarrier and must answerfor any breach of duty

Charterer regarded asowner pro hac vice forthe voyage

Charterer is not regarded as owner.

Owner of vessel

relinquishes possession,command andnavigation to charterer

The vessel owner

retains possession,command andnavigation of the ship

Common carrier isconverted to privatecarrier.

Common carrier is not converted to a privatecarrier.


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PERSONS WHO MAY MAKE A CHARTER1. Owner or owners of the vessel, either in whole or in majority part, who have legal control and possession of the vessel2. Charterer may subcharter entire vessel to 3 rd person only if not prohibited in original charter. (Art. 679 )3. Ship agent if authorized by the owner/s or given such power in the certificate of appointment. (Art.5 98)4. Captain in the absence of the ship agent or consignee and only if he acts in accordance with the instructions of the agent

or owner and protects the latter s interests. (Art. 609)

REQUISITES OF A VALID CHARTER PARTY1. Consent of the contracting parties2. Existing vessel which should be placed at the disposition of the shipper3. Freight 4. Compliance with Art. 652 of the Code of Commerce

Clauses Which May Be Included In a Charter Party

Jason clause Clause paramount orparamount clause

A stipulation in a charterparty that in case of amaritime accident for

which the shipowner isnot responsible by law,contract or otherwise,the cargo shippers,consignees or ownersshall contribute with theshipowner in generalaverage. (Pandect of Commercial Law andJurisprudence, JusticeJose Vitug, 1997 ed.)

A clause in a charterparty providing that theCOGSA shall apply, even

though thetransportation isdomestic, subject to theextent that any term of the bill of lading isrepugnant to the COGSAor applicable law, thento the extent thereof theprovision of the bill of lading is void. (Pandect of Commercial Law andJurisprudence, JusticeJose Vitug, 1997 ed.)

Rights and Obligations of Parties

SHIPOWNER ORSHIP AGENT

CHARTERER

1. If the vessel ischartered wholly, not toaccept cargo fromothers;2. To observerepresented capacity;3. To unload cargoclandestinely placed4. To substituteanother vessel if load isless than 3/5 of capacity;5. To leave the port if the charterer does not bring the cargo withinthe lay days and extralay days allowed;6. To place in a vesselin a condition to

1. To pay the agreedcharter price;2. To pay freightageon unboarded cargo;3. To pay losses toothers for loadinguncontracted cargo andillicit cargo;4. To wait if thevessel needs repair;5. To pay expensesfor deviation. (Arts.679 -687 )


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navigate;7. to bring cargo tonearest neutral port incase of war or blockade.(Arts. 669 -678 )

Rescission of a Charter Party At charterer s

request(Art 688)

Atshipowner s

request(Art. 689)

Fortuitouscauses

(Art. 690)

1. Byabandoningthe charter andpaying half of the freightage;2. Error intonnage orflag;3. Failure toplace thevessel at the

charterer sdisposal;4. Return of the vessel dueto pirates,enemies or badweather;5. Arrival at aport forrepairs.

1. If the extralay daysterminatewithout thecargo beingplacedalongside thevessel;2. Sale by theowner of thevessel before

loading by thecharterer;

1. War orinterdiction of commerce;2. Blockade;3. Prohibitionto receivecargo;4. Embargo;and5. Inability of the vessel to

navigate.

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 vessel

beyond the number of days allowed by the charter party for loading or unloading or for sailing.3. Deadfreight the amount paid by or recoverable from a charterer of a ship for the portion of the ship s capacity the latter

contracted for but failed to occupy.4. Lay Days - days allowed to charter parties for loading and unloading the cargo.5. Extra Lay Days days which follow after the lay days have elapsed.

USUAL FORMS OF CONSUMMATING CONTRACTS1. C.I.F. cost, insurance and freight;2. F.O.B. - free on board;3. F.A.S. - free alongside ship; and4. C. & F. - cost and freight.

TRANSSHIPMENT OF GOODSThe 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 transferfor further transportation from one ship or conveyance to another.

It is not dependent on the ownership of the transporting ships or in the change of carriers, but rather on the fact of actualphysical transfer of cargo from one vessel to another.

If done without legal excuse, however competent and safe the vessel into which the transfer is made, is a violation of contract and infringement of right of shipper and subjects carrier to liability if freight is lost event by cause otherwise excepted. (MagellanManufacturing vs. C A, 20 1 SCR A 102)

LOAN ON BOTTOMRY AND RESPONDENTIAA real, unilateral, aleatory contract, by virtue of which one person lends to another a certain amount of money or goods on things

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 latter are lost.


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LOAN ONBOTTOMRY

LOAN ONRESPONDENTIA

DefinitionLoan made byshipowner or shipagent guaranteed byvessel itself andrepayable upon arrivalof vessel at destination. (Art. 719 )

Loan taken on securityof the cargo laden on avessel, and repayableupon safe arrival of cargo at destination.(Art. 719 )

Who may contract Shipowner or shipagent. Outside of theresidence of theowners - the captain.

Only the owner of thecargo.

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 andthe broker taking part therein

3. Private instrument (Art. 720)Contents:

1. K ind, name and registry of the vessel;2. Name, surname and domicile of the captain;3. Names, surnames and domiciles of the

borrower and the lender;4. Amount of the loan and the premium

stipulated;5. Time for repayment;6. Goods pledged to secure repayment;7. Voyage during which the risk is run (Art. 721)

BOTTOMRY/RESPONDENTIA

ORDINARY LOAN(MUTUUM)

Not subject to UsuryLaw

Subject to Usury Law

Liability of theborrower is contingent on the safe arrival of the vessel or cargo at destination

Not subject to anycontingency (absoluteliability)

The last lender is apreferred creditor

The first lender is apreferred creditor

WHEN LOAN ON BOTTOMRY OR RESPONDENTIA REGARDED AS SIMPLE LOAN1. Lender loaned an amount larger than the value of the object due to fraudulent means employed by the borrower.

(ART.726)2. Full amount of the loan is not used for the cargo or given on the goods if all of them could not have been loaded, the

balance will be considered a simple loan. (A RT.727)3. If the effects on which the money is t aken is not subjected to any risk. (A RT.729)

Note : Under existing laws, the parties to a loan, whether ordinary or maritime, may agree on any rate of interest. ( CB Circular 905)


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MARINE INSURANCE LOAN ONBOTTOMRY OR

RESPONDENTIAIndemnity is paid after theloss has occurred

Indemnity is paid inadvance by way of a loan

In case of loss of the vesseldue to a risk insuredagainst, the obligation of the insurer becomesabsolute

In case of loss of the vessel due to amarine peril, theobligation of theborrower to pay isextinguished

Consensual contract Real contract

Hypothecary Nature of Bottomry/ Respondentia GENE R AL 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. EX C EP TI O NS:

1. Loss due to inherent defect;2. Loss due to the barratry on the part of the captain;3. Loss due to the fault or malice of the borrower;4. The vessel was engaged in contraband; and5. The cargo loaded on the vessel be different in from that agreed upon.

Concurrence of Marine Insurance and Loan on Bottomry/Respondentia1. The insurable interest of the owner of a ship hypothecated by bottomry is only the excess of the value over the amount

secured by bottomry. (Sec. 101, Insurance Code)2. The value of what may be saved in case of shipwreck shall be divided between the lender and the insurer in proportion to

the interest of each one. (Art. 735)

Note: If a vessel is hypothecated by bottomry only the excess is insurable, since a loan on bottomry partakes of the nature likewiseof an insurance coverage to the extent of the loan accommodation. The same rule would apply to the hypothecation of the cargo byrespondentia. ( P andect of Commercial L aw and Jurisprudence, Justice Jose Vitug, 1997 ed.)

ACCIDENTS IN MARITIME COMMERCE1. Averages2. Arrival Under Stress3. Collision4. Shipwreck

AVERAGEAn 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 theport of consignment. (Art. 806)

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

Classes:1. Particular or Simple Average2. Gross or General Average

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

Expenses incurred to refloat a vessel, which accidentally ran aground, in order to continue its voyage, do not constitute generalaverage. Not only is there absence of a marine peril, common safety factor, and deliberateness. It is the safety of the property, andnot the voyage, which constitutes the true foundation of general average. (A. Magsaysay, Inc. vs. Agan, G. R.No. L- 6393, Jan. 3 1,1955)

PARTICULAR ORSIMPLE

GROSS OR GENERAL

DefinitionDamages or expensescaused to the vessel orcargo that did not inureto the common benefit,and borne by respective

Damages or expensesdeliberately caused inorder to save thevessel, its cargo orboth from real and


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owners. (Art. 809) known risk. (Art. 811 )Requisites

1. common danger;2. deliberate

sacrifice;3. success;4. proper formalities

and legal steps.Liability

The owner of the goodswhich gave rise to theexpense or suffered thedamage shall bear thisaverage. (Art. 810)

All the persons havingan interest in thevessel and the cargotherein at the time of the occurrence of theaverage shallcontribute to satisfythis average. (Art. 812)

The insurers(Art.859) and lenderson bottomry andrespondentia shalllikewise contribute.(Art.732).

Number of interests involvedOnly one interest involved

Several interestsinvolved

Share in the damage or expense100% share In proportion to the

value of the owner sproperty saved

Right to recoverNo reimbursement There may be

reimbursement Kinds (not exclusive)

Art. 809 Art. 811 Procedure for recovery

1. Assembly anddeliberation2. Resolution of thecaptain3. Entry of theresolution in thelogbook4. Detailed minutes5. Delivery of theminutes to themaritime judicialauthority of the first port, within 24 hoursfrom arrival,6. Ratification bycaptain under oath.(Arts. 813-814)

GOODS NOT COVERED BY GENERAL AVERAGE EVEN IF SACRIFICED1. Goods carried on deck. (A RT.855)2. Goods not recorded in the books or records of the vessel. (A RT.855 (2))3. Fuel for the vessel if there is more than sufficient fuel for the voyage. ( Rule I X , York-Antwerp Rule)

JettisonAct of throwing cargo overboard 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. 81 5)


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Jettisoned goods are not res nullius nor deemed abandoned within the meaning of civil law so as to be the object of occupationby salvage. ( P andect of Commercial L aw and Jurisprudence , Justice Jose Vitug , 1997 ed. )

In order that the jettisoned goods may be included in the gross or general average , the existence of the cargo on board should beproven by means of the bill of lading. (Art. 816)

York-Antwerp (Y-A) Rules on Determining Liability for Averages With Regard To Deck Cargo1. Deck cargo is allowed only in domestic/coastwise/inter-island shipping, and is prohibited in international/overseas/foreignshipping.2. If deck cargo is loaded with the consent of the shipper on overseas trade, it must always contribute to general average, but should the same be jettisoned, it would not be entitled to reimbursement because there is violation of the Y-A Rules.3. If deck cargo is loaded with the consent of the shipper on coastwise shipping, it must always contribute to general averageand if jettisoned would be entitled to reimbursement.

Reason: In domestic shipping, voyages are usually short and the seas are generally not rough. In overseas shipping, the vessel isexposed for many days to perils of the sea.

DOMESTIC INTERNATIONALDeck cargo is allowed Deck cargo is not

allowedWith shipper s consent

General average Particular averageWithout shipper s consent

Captain is liable Captain is liable

ARRIVAL UNDER STRESS (ARRIBADA) The arrival of a vessel at the nearest and most convenient port instead of the port of destination, if during the voyage the vessel

cannot continue the trip to the port of destination.

When lawful Whenunlawful

Who bearsexpenses:

The inability tocontinuevoyage is dueto lack of provisions,well-foundedfear of seizure,privateers,pirates, oraccidents of the seadisabling it tonavigate. (Art.819 )

1. Lack of provisions dueto negligence tocarry accordingto usage andcustoms;2. Risk of enemy not wellknown ormanifest 3. Defect of vessel due toimproperrepair; and4. Malice,negligence, lackof foresight orskill of captain.(Art. 820)

The shipowneror ship agent is liable in caseof unlawfularrival understress. But they shall not be liable forthe damagescaused byreason of alawful arrival.(Art. 821)

It is the duty of the captain to continue the voyage without delay after the cause of the arrival under stress has ceased failing insuch duty renders him liable. However, in case the cause has been risk of enemies, there must first be an assembly beforedeparture. (Art. 825)

Steps:

1.

Captain should determine during the voyage if there is well founded fear of seizure, privateers and other valid grounds;2. Captain shall assemble the officers and summon the persons interested in the cargo who may attend the meeting but without a right to vote;

3. The officers shall determine and agree if there is well-founded reason after examining the circumstances. The captainshall have the deciding vote;

4. The agreement shall be drafted and the proper minutes shall be signed and entered in the log book;5. Objections and protests shall likewise be entered in the minutes.

COLLISIONImpact of two vessels both of which are moving.


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AllisionImpact between a moving vessel and a stationary one.

Nautical Rules to Determine Negligence1. When two vessels are about to enter a port, the farther one must allow the nearer to enter first; if they collide, the fault is

presumed to be imputable to the one who arrived later, unless it can be proved that there was no fault on its part.2. When two vessels meet, the smaller should give the right of way to the larger one.3. A vessel leaving port should leave the way clear for another which may be entering the same port.4. The vessel which leaves later is presumed to have collided against one which has left earlier.5. There is a presumption against the vessel which sets s ail in the night.6. There is a presumption against the vessel with spread sails which collides with another which is at anchor and cannot move,

even when the crew of the latter has received word to lift anchor, when there was not sufficient time to do so or there wasfear of a greater damage or other legitimate reason.

7. There is a presumption against an improperly moored vessel.8. There is a presumption against a vessel which has no buoys to indicate the location of its anchors to prevent damage to

vessels which may approach it.9. Vessels must have proper look-outs or persons trained as such and who have no other duty aside therefrom. (Smith Bell v.

C A)

Nautical Rules as to Sailing Vessel and Steamship1. Where a steamship and a sailing vessel are approaching each other from opposite directions, or on intersecting lines, the

steamship from the moment the sailing vessel is seen, shall watch with the highest diligence her course and movements so asto be able to adopt such timely means of precaution as will necessarily prevent the two boats from coming in contact.

2. The sailing vessel is required to keep her course unless the circumstances require otherwise.

Zones of Time in the Collision of Vessels1. First zo n e all ti me up to t he m o me n t whe n ris k o f co llisio n beg i n s .

No rule is as yet applicable for none is necessary.2. S eco n d zo n e time betwee n mo me n t whe n risk o f co llisio n begi n s a n d mo me n t it be co mes a pra c tic al c ertai n ty.

It is in this period where conduct of the vessels is primordial. It is in this zone that vessels must strictly observe nautical rules,unless a departure therefrom becomes necessary to avoid imminent danger.3. Third zo n e t i me w h en co lli sio n i s ce r ta i n an d t i me o f i mpact.

An error in this zone would no longer be legally consequential. E rror in E xtremis - sudden movement made by a faultless vessel during the third zone of collision with another vessel which is at

fault during the 2nd zone. E ven if such sudden movement is wrong, no responsibility will fall on said faultless vessel. (Urrutia andCo. v. Baco River Plantation Co., 2 6 PHIL 632)

Cases Covered By Collision and Allision1. On e ve ss el at fault

Vessel at fault is liable for damage caused to innocent vessel as well as damages suffered by the owners of cargo of both vessels.(Art. 826)2. B oth vess els at fault

Each vessel must bear its own loss, but the shippers of both vessels may go against the shipowners who will be solidarily liable.(Art. 827)3. V ess el at fault n ot kn ow n

Each vessel must bear its own loss, but the shippers of both vessels may go against the shipowners who will be solidarily liable.(Art. 828)

D octri n e of I n scruta bl e F ault I n cas e of collisio n whe r e it ca nn ot be de t er mi n ed wh ic h be t wee n t he t wo vess els was at fault , b ot h ve ss els be ar t he ir r es pe cti ve d a ma ge, b ut bot h s houl d be soli daril y lia bl e for da ma ge to t he car go of bot h ve ss els .

4. Third vess el at fault The third vessel will be liable for losses and damages. (Art. 831)

5. F ortuitous eve n t / forc e m aj eur eNo liability. Each bears its own loss. (Art. 830)

The doctrine of res ipsa loquitur applies in case a moving vessel strikes a stationary object, such as a bridge post, dock, or

navigational aid. (Far Eastern Shipping v. C A, Luzon Stevedoring vs. C A)

Even if the cause of action against the common carrier is based on quasi-delict, the defense of due diligence in the selection andsupervision of employees is unavailing in case of a maritime tort resulting in collision. It is not a civil tort governed by the Civil Codebut a maritime one governed by Arts. 826-839 of the Code of Commerce. (Manila Steamship vs. Insa Abdulhaman)

Doctrine of Last Clear Chance and Rule on Contributory Negligence cannot be applied in collision cases because of Art. 827 of theCode of Commerce. (Notes and Cases on the Law on Transportation and P ublic Utilities, Aquino, T. & Hernando, R.P . 2004 ed.)

MARITIME PROTEST Condition precedent or prerequisite to recovery of damages arising from collis ions and other maritime accidents.


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It is a written statement made under oath by the captain of a vessel after the occurrence of an accident or disaster in which thevessel or cargo is lost or damaged, with respect to the circumstances attending such occurrence, for the purpose of recoveringlosses and damages.

Excuses for not filing protest: 1) where the interested person is not on board the vessel; and 2) on collision time, need not beprotested. (Art. 836)

Cases applicable:1. Collision (Art. 835);2. Arrival under stress (Art. 612(8));3. Shipwrecks (Arts. 61 2(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)

SHIPWRECKIt 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: Ov ers eas t ra de only. (Comme rcia l L aw Rev i ew, C. V i lla nu ev a, 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 L aw Review, C. V illanueva,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 K ian 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 negligenceand while the goods are in the custody of the arrastre operator. (Hartford Fire Insurance v. E. Razon, Inc.)

STEVEDORING SERVICEThe 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 SYSTEMSystem 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

Documents

Contract of Transportation