Transpo Mem Aid

San Beda College of Law 54

MEMORY AID IN COMMERCIAL LAWTRANSPORTATION LAWS

CONTRACT OF TRANSPORTATION/ CARRIAGE A contract whereby a person, natural or juridical, obligates to transport persons, goods, or both, from one place to another, by land, 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 Air 5. Domestic/inter-island/coastwise or

International/foreign It is a relationship which is imbued with the public interest.

COMMON CARRIER Persons, corporations, firms or associations engaged in the business of carrying or transporting passengers or goods or both, by land, water, or air, for compensation, offering their services to the public (Art. 1732, Civil Code). Art. 1732 of the New Civil Code avoids any distinction between one whose principal business activity is the carrying of persons or goods or both and one who does such carrying only as an ancillary activity (sideline). It also avoids a distinction between a person or enterprise offering transportation service on a regular or scheduled basis and one offering such service on an occasional, episodic or unscheduled basis.

Neither does the law distinguish between a carrier offering its services to the general public that is the general community or population and one who offers services or solicits business only from a narrow segment of the general population.

A person or entity is a common carrier

even if he did not secure a Certificate of Public Convenience (De Guzman vs. CA, 168 SCRA 612). It makes no distinction as to the means of transporting, as long as it is by land, water or air. It does not provide that the transportation should be by motor vehicle. (First Philippine Industrial Corporation vs. CA) One is a common carrier even if he has no fixed and publicly known route, maintains no terminals, and issues no tickets (Asia Lighterage Shipping, Inc. vs. CA). Characteristics:

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

2. Cannot lawfully decline to accept a particular class of goods for carriage to the prejudice of the traffic in these goods;

3. No monopoly is favored (Batangas Trans. 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 for compensation. (Home Insurance Co. vs. American Steamship Agency, 23 SCRA 24)

TESTS WHETHER CARRIER IS COMMON OR PRIVATE: The SC in First Philippine Industrial Corporation vs. CA (1995) reiterated the following tests:

1. It must be engaged in the business of carrying goods for others as a public

COMMERCIAL LAW COMMITTEE CHAIRPERSON: Garny Luisa Alegre ASST. CHAIRPERSON: 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 CU (Law on Intellectual Property)


MEMORY AID IN COMMERCIAL LAWemployment and must hold itself out as ready to engage in the transportation of goods generally as a business and not as a casual occupation;

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

3. It must undertake to carry by the method by which his business is conducted and over its established roads; and

4. The transportation must be for hire. In National Steel Corp. vs. CA (1997) the SC held that the true test of a common carrier is the carriage of goods or passengers provided it has space for all who opt to avail themselves of its transportation for a fee.

COMMON CARRIER

PRIVATE CARRIER

1. As to availabilityHolds himself out for all people indiscriminately

Contracts with particular individuals or groups only

2. As to required diligenceExtraordinary diligence is required

Ordinary diligence is required

3. As to regulationSubject to State regulation

Not subject to State regulation

4. Stipulation limiting liabilityParties may not agree on limiting the carriers liability except when provided by law

Parties may limit the carriers liability, provided it is not contrary to law, morals or good customs

5. Exempting circumstanceProve extraordinary diligence and Art. 1733, NCC

caso fortuito, Art. 1174 NCC

6.Presumption of negligenceThere is a presumption of fault or negligence

No presumption of fault or negligence

7.Governing lawLaw on common carriers

Law on obligations and contracts

GOVERNING LAWSA. Domestic/inter-island/coastwise Applicable to Land, Water, and Air transportation

1. Civil Code - primary2. Code of Commerce (Arts. 349, 379,

573-734, 580, 806-845) - suppletory

B. International/foreign/overseas (Foreign country to Philippines) Applicable to Water/maritime and Air transportation The law of the country of destination generally applies.

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

a. Water/maritime: Carriage of Goods by Sea Act (COGSA)

b. Air: Warsaw Convention

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

REQUIREMENT OF EXTRAORDINARY DILIGENCE Rendition of service with the greatest skill and utmost foresight. (Davao Stevedore Co. v. Fernandez) Rationale:



MEMORY AID IN COMMERCIAL LAW1. From the nature of the business and

for reasons of public policy (Art. 1733)2. Relationship of trust3. Business is impressed with a special

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

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

COVERAGE1. Vigilance over goods (Arts. 1734-1754); and2. Safety of passengers (Arts. 1755-1763).

PASSENGER A person who has entered into a contract of carriage, express or implied, with the carrier. They are entitled to extraordinary diligence from the common carrier. The following are not considered passengers, and are entitled to ordinary diligence only:

a. One who has not yet boarded any part of a vehicle regardless of whether or not he has purchased a ticket;

b. One who remains on a carrier for an unreasonable length of time after he has been afforded every safe opportunity to alight;

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

d. One who attempts to board a moving vehicle, although he has a ticket, unless the attempt be with the knowledge and consent of the carrier;

e. One who has boarded a wrong vehicle, has been properly informed of such fact, and on alighting, is injured by the carrier;

f. Invited guests and accommodation passengers. (Lara vs. Valencia)

g. One who rides any part of the vehicle which is unsuitable or dangerous or which he knows is not designed or

intended for passengers.

DEFENSES OF A COMMON CARRIER IN THE CARRIAGE OF GOODS1. CASO FORTUITO/FORCE MAJEURE Requisites:

a. Must be the proximate and only cause of the loss b. Exercise of due diligence to prevent or minimize the loss before, during or after the occurrence of the disaster (Art. 1739)c. Carrier has not negligently incurred in delay in transporting the goods (Art. 1740)

Fire is not considered a natural disaster or calamity as it arises almost invariably from some act of man. (Eastern Shipping Lines Inc. vs. IAC) Mechanical defects are not force majeure if the same was discoverable by regular and adequate inspections. (Notes and Cases on the Law on Transportation and Public Utilities, Aquino, T. & Hernando, R.P. 2004 ed. p.120-122)

2. ACTS OF PUBLIC ENEMY Requisites:

a. Must be the proximate and only cause of the lossb. Exercise of due diligence to prevent or minimize the loss before, during or after the act causing the loss, deterioration or destruction of the goods (Art. 1739)

3. NEGLIGENCE OF THE SHIPPER OR OWNER

a. Sole and proximate cause: absolute defense

b. Contributory: partial defense. (Art. 1741)

4. CHARACTER OF THE GOODS OR DEFECTS IN THE PACKING OR IN THE CONTAINER Even if the damage should be caused by



MEMORY AID IN COMMERCIAL LAWthe inherent defect/character of the goods, the common carrier must exercise due diligence to forestall or lessen the loss. (Art. 1742) The carrier which, knowing the fact of improper packing of the goods upon ordinary observation, still accepts the goods notwithstanding such condition, is not relieved of liability or loss or injury resulting therefrom. (Southern Lines, Inc. v. CA, 4 SCRA 258)

5. ORDER OR ACT OF PUBLIC AUTHORITY Said public authority must have the power to issue the order (Art. 1743). Consequently, where the officer acts without legal process, the common carrier will be held liable. (Ganzon v. CA 161 SCRA 646) Diligence in the selection and supervision of employees under Article 2180 of the Civil Code cannot be interposed as a defense by the common carrier because the liability of the carriers arises from the breach of the contract of carriage. The defense under said articles is applicable to negligence in quasi-delicts under Art. 2176. (Del Prado v. Manila Electric Co., 52 Phil 900)

LIABILITY OF A COMMON CARRIER FORDEATH OR INJURIES TO PASSENGERS DUE TO ACTS OF ITS EMPLOYEES AND OTHER PASSENGERS OR STRANGERS

FOR ACTS OF ITS

EMPLOYEES

FOR ACTS OF OTHER

PASSENGERS OR

STRANGERSRequired diligence and defenseExtraordinary diligence

Ordinary diligence

Nature of liabilityTort; however,The employee must be on duty at the time of the act. (Maranan v. Perez)

Not absolute; limited by Art. 1763

The carrier is liable when its personnel allowed a passenger to drive the vehicle causing it to collide with another vehicle resulting to the injuries suffered by the other passengers. (MRR vs. Ballesteros, 16 SCRA 641)

CARRIAGE OF GOODS CARRIAGE OF PASSENGERS

Parties1. Common carrier2. Shipper3. Consignee

1. Common carrier2. Passenger

Cause of liabilityDelay in delivery, loss, destruction, or deterioration of the goods

Death or injury to the passengers

Duration of liability

From the time the goods are unconditionally placed in the possession of, and received by

The duty of a common carrier to provide safety to its passengers so obligates it not only during the



MEMORY AID IN COMMERCIAL LAWthe carrier for transportation until the same are delivered actually or constructively by the carrier to the consignee or to the person who has the right to receive them. (Art. 1736) It remains in full force and effect even when they are temporarily unloaded or stored in transit unless the shipper or owner has made use of the right of stoppage in transitu. (Art. 1737) It continues to be operative even during the time the goods are stored in a warehouse of the carrier at the place of destination until the consignee has bee advised of the arrival of the goods and has had reasonable opportunity thereafter to remove them or otherwise dispose of them. (Art. 1738) Delivery of goods to the custom authorities is not delivery to the consignee. (Lu Do v. Binamira, 101 Phil 120)

course of the trip, but for so long as the passengers are within its premises and where they ought to be in pursuance to the contract of carriage. (LRTA v. Navidad, [2003]) All persons who remain on the premises within a reasonable time after leaving the conveyance are to be deemed passengers, and what is a reasonable time or a reasonable delay within this rule is to be determined from all the circumstances, and includes a reasonable time to see after his baggage and prepare for his departure. (La Mallorca v. CA, 17 SCRA 739 ; Abiotiz Shipping Corporation v. CA, 179 SCRA 95) It is the duty of common carriers of passengers to stop their conveyances a reasonable length of time in order to afford passengers an opportunity to enter, and they are liable for injuries suffered from the sudden starting up or jerking of their conveyances while doing so. The duty which the carrier of passengers owes to its patrons extends to persons boarding the cars as well as to those alighting therefrom (Dangwa Trans Co., Inc. vs. CA 202 SCRA 574).

Presumption of negligence

Art.1735 Civil CodeReason: As to when and how goods were damaged in transit is a matter peculiarly within the knowledge of the carrier and its employees. (Mirasol v. Dollar, 53 PHIL 124)

Art.1755 Civil CodeReason: The contract between the passenger and the carrier imposes on the latter the duty to transport the passenger safely; hence the burden of explaining should fall on the carrier.



MEMORY AID IN COMMERCIAL LAWMere proof of delivery of goods

to a carrier in good order and the subsequent arrival of the same goods at the place of destination in bad order makes for a prima facie case against the carrier. (Coastwise Lighterage Corp. v. CA, 245 SCRA 796)

Defenses

1. Ordinary circumstance: Exercise of extraordinary diligence (Art. 1735)

2. Special circumstances:a. Flood, storm,

earthquake, lighting, or other natural disaster or calamity (plus force majeure)

b. Act of the public enemy in war, whether international or civil

c. Act or omission of the shipper or the owner of goods

d. The character of the goods or defects in the packing or in the containers

e. Order or act of competent public authority (Art. 1734)

1. Exercise of extraordinary diligence (Art. 1756)

2. Caso fortuito



MEMORY AID IN COMMERCIAL LAWValid stipulations

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

a) In writing, signed by the shipper or owner;

b) Supported by a valuable consideration other than the service rendered by the carriers; and

c) Reasonable, just and not contrary to public policy. (Art. 1744)

2. Fixed amount of liability: A contract fixing the sum to be recovered by the owner or shipper for the loss, destruction or deterioration of the goods, if it is reasonable and just under the circumstances and has been fairly and freely agreed upon. (Art. 1750)3. Limited liability for delay: An agreement limiting the common carriers liability for delay on account of strikes or riots (Art. 1748)4. Stipulation limiting liability to the value of the goods appearing in the bill of lading, unless the shipper or owner declares a greater value. (Art. 1749)

The diligence required in the carriage of the goods may be reduced by only one degree, from extraordinary to ordinary diligence or diligence of a good father of a family. (Art. 1744, Art. 1745, no. 4)

Stipulation limiting liability when a passenger is carried gratuitously, but not for willful acts or gross negligence. (Art. 1758)

Void stipulations

1. That the goods are transported at the risk of the

Dispensing with or lessening the extraordinary responsibility of a



MEMORY AID IN COMMERCIAL LAWowner 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 any diligence in the custody of the goods;4. That the carrier shall exercise a degree of diligence less than that of a good father of a family over the movable transported;5. That the carrier shall not be responsible for the acts or omissions of his or its employees;6. That the carriers liability for acts committed by thieves or robbers who do not act with grave or irresistible threat, violence or force is dispensed with or diminished;7. That the carrier is not responsible for the loss, destruction or deterioration of the goods on account of the defective condition of the car, vehicle, ship or other equipment used in the contract of carriage. (Art. 1745)

common carrier for the safety of passengers imposed by law by stipulation, by posting of notices, by statements on tickets or otherwise. (Art. 1757)


RULES ON PASSENGERS BAGGAGEIN THE

CUSTODY OF THE

PASSENGERS (HAND-

CARRIED)

IN THE CUSTODY

OF THE COMMON CARRIER

(CHECKED-IN)

Legal nature of the baggageNecessary deposit

Considered as goods

Required diligence by the common carrier

Diligence of a depositary (ordinary diligence)

Extraordinary diligence

Applicable rulesArts. 1998 and 2000-2003

Arts. 1733-1753

CONCURRING CAUSES OF ACTION ARISING FROM THE NEGLIGENT ACT OF THE COMMON CARRIER1. Culpa contractual (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. 2180, 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. Culpa criminal (criminal negligence) The driver is primarily liable. The carrier is subsidiarily liable only if the driver is convicted and declared insolvent. Basis: Art. 100, RPC.

In case of injury to a passenger due to the negligence of the driver of the bus on which

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

LIMITATIONS AS TO CARRIERS LIABILITY INVALID AS

BEING CONTRARY TO PUBLIC

POLICY

VALID & ENFORCEAB

LE

1. One exempting the carrier from any and all liability for loss or damage occasioned by its own negligence.2. An unqualified limitation of liability to an agreed valuation.

1. One limiting the liability of the carrier to an agreed valuation, unless the shipper declares a higher value and pays a higher rate of freight(H.E. Heacock Company 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 caused by its own negligence. (Shewaram vs. PAL, 17 SCRA 606)

SPECIAL RULES ON LIABILITES OF AIRLINE CARRIERS1. In case of flight diversion due to bad weather or other circumstances beyond the pilots control, the relation between the carrier and the passenger continues until the latter has been landed at the port of destination and has left the carriers 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 Airlines vs. CA, 226 SCRA 423)2. Even where overbooking of passengers is allowed as a commercial practice, the airline company would still be guilty of bad faith and still be liable for damages if it did not properly inform passenger that it could breach the contract of carriage even if they were confirmed passengers. (Zalamea vs. CA, 228 SCRA 23)3. An open-dated ticket constitutes a complete contract between the carrier and passenger. Hence, the airline company is liable if it refused to confirm a passengers flight reservation. (Singson vs. CA, 282 SCRA 149)4. An airline company which issued a confirmed ticket to a passenger covering successive trips on different airlines can be held liable for damages occasioned by bumping off by one of the successive airlines. (Lufthansa German Airlines vs. CA, 238 SCRA 290)5. An airline ticket providing that carriage by successive air carriers is to be regarded as a single operation is to make the issuing carrier liable for the tortuous conduct of the other carrier. A printed provision in the ticket limiting liability only to its own conduct is not enough to rebut that liability. (KLM Royal Dutch Airlines vs. CA, 65 SCRA 237)

II. CODE OF COMMERCE

A. OVERLAND TRANSPORTATION(Arts. 349-379)

Applicability1. Domestic land and water/maritime transportation. (Pandect of Commercial Law and Jurisprudence, Justice Jose Vitug, 1997 ed.)2. Domestic Air Transportation. (Commercial Law Review, Cesar Villanueva, 2004 ed.) IMPORTANT CONCEPTS:

1. Bill of lading2. Obligations of the carrier

3. Right of abandonment4. 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. Rules: 1. It is not indispensable for the creation of a contract of carriage. (Compania Maritima vs. Insurance 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 bound by all the stipulations contained therein by making a claim for loss on the basis of said bill of lading. (Sea-Land Services Inc. vs. IAC)

4. The right of a party to recover for loss of shipment consigned to him under a bill of lading drawn up only by and between the shipper and the carrier, springs from either a relation of agency between him and the shipper, or his status as stranger in whose favor some stipulation is made in said contract, and who becomes a party thereto when he 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 to the knowledge of the shipper and agreed to by him and, in the absence of fraud or mistake; he is estopped from thereafter denying that he assented to such terms. (Notes and Cases on the Law on Transportation and Public Utilities, Aquino, T. & Hernando, R.P. 2004 ed. p.261)

Kinds:1. On board - issued when the goods have

been actually placed aboard the ship with very reasonable expectation that the shipment is as good as on its way.

2. Received - one in which it is stated that the goods have been received for shipment with or without specifying the vessel by which the goods are to be shipped.

3. Negotiable - one in which it is stated that the goods referred to therein will be delivered to the bearer or to the order of any person named therein.

4. Non-negotiable - One in which it is stated that the goods referred to therein will be delivered to a specified person.

5. Clean One which does not indicate any defect in the goods.

6. Foul One which contains a notation thereon indicating that the goods covered by it are in bad condition.

7. Spent One which covers goods that already have been delivered by the carrier without a surrender of a signed copy of the bill.

8. Through One issued by the carrier who is obliged to use the facilities of other carriers as well as his own facilities for the purpose of transporting the goods from the city of the seller to the city of the buyer, which bill of lading is honored by the second and other interested carriers who do not issue their own bills.

9. Custody One wherein the goods are already received by the carrier but the vessel indicated therein has not yet arrived in the port.

10. Port One which is issued by the carrier to whom the goods have been delivered, and the vessel indicated in the bill of lading by which the goods are to be shipped is already in the port where the goods are held for shipment.

Functions:1. Best evidence of the existence of the

contract of carriage of cargo (Art. 353)2. Document of title3. Receipt of cargo 4. Contract to transport and deliver goods

as stipulated5. Symbol of the goods

OBLIGATIONS OF THE CARRIERA. Duty to accept the goodsGENERAL RULE: A common carrier cannot ordinarily refuse to carry a particular class of goods.EXCEPTION: For some sufficient reason the discrimination against the traffic in such goods is reasonable and necessary. (Fisher vs. Yangco Steamship Co. 31 Phil 1). Instances when the carrier may validly refuse to accept the goods include the ff: 1.) Goods sought to be transported are dangerous objects, or substances including dynamite and other explosives2.) Goods are unfit for transportation3.) Acceptance would result in overloading4.) Contrabands or illegal goods5.) Goods are injurious to health6.) Goods will be exposed to untoward danger like flood, capture by enemies and the like7.) Goods like livestock will be exposed to disease8.) Strike9.) Failure to tender goods on time. (Notes and Cases on the Law on Transportation and Public Utilities, Aquino, T. & Hernando, R.P. 2004 ed. p.68) In 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. CA)

B. Duty to deliver the goods Not 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.

Time of deliveryStipulated in Contract/Bill

of Lading

No stipulation

1. Carrier is bound to fulfill the contract and is liable for any delay; no matter from what cause it may have arisen.

1. Within a reasonable time. 2. Carrier is bound to forward them in the 1st shipment of the same or similar goods which he may make to the point of delivery. (ART. 358 Code of Commerce)

Effects of delaya. Merely suspends and generally does not terminate the contract of carriage b. 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 carriers 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. 363);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. 371).

NOTICE OF DAMAGE (ART. 366) Requisites for applicability:1. Domestic/inter-island/coastwise

transportation2. Land/water/air transportation

3. 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)Purpose of notice: To inform the carrier that the shipment has been damaged, and it is charged with liability therefore, and to give it an opportunity to make an investigation and fix responsibility while the matter is fresh. The filing of notice of claim is a condition precedent for recovery. Shorter period may be stipulated by the parties because it merely affects the shippers remedy and does not affect the liability of the carrier. (PHILAMGEN vs. Sweetlines, Inc.) Prescriptive Period Not provided by Article 366. 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 years

2. Bill of lading was issued: within 10 years.

ARTICLE 366 COGSA Sec.3 (6)

Applicability1. Domestic/inter-island/coastwise transportation2. Land, water, air transportation3. Carriage of goods

1. International/overseas/foreign (from foreign country to Phils.)Note: subject to the rule on Paramount Clause2.

Water/maritime transportation3. Carriage of goods

Notice of damage1. Condition precedent2. 24-hour period for claiming latent damage

1.Not a condition precedent2.3-day period for claiming latent damage

Prescriptive periodNone provided; Civil Code applies.

One year from the date of delivery (delivered but damaged goods), or date when the vessel left port or from the date of delivery to the arrastre (non-delivery or loss).

COMBINED CARRIER AGREEMENT (ART. 373)GENERAL RULE: In case of a contract of transportation of several legs, each carrier is responsible for its particular leg in the contract.EXCEPTION: 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.

A. MARITIME COMMERCE(Arts. 573-869)

IMPORTANT CONCEPTS:1. Merchant vessel2. Maritime lien and Preference of Credit3. Doctrine of limited liability4. Causes of revocation of voyage5. Participants in maritime commerce

6. Charter party7. Loans on bottomry and respondentia8. Accidents in maritime commerce

MARITIME/ADMIRALTY LAW It 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. (Notes and Cases on the Law on Transportation and Public Utilities, Aquino & Hernando, citing Francisco, p.254)

Maritime laws apply only to maritime trade and sea voyages. (Pandect of Commercial Law and Jurisprudence, Justice Jose Vitug, 1997 ed.)

Arrastre service is not maritime in character. It refers to a contract for the unloading of goods from a vessel. (ICTSI vs. Prudential Guarantee, 320 SCRA 244)

CHARACTERISTICS OF MARITIME TRANSACTION1. Real - similar to transactions over real property with respect to effectivity against third persons which is done through registration. (Rubiso vs. Rivera, 37 Phil. 72). The evidence of real nature is shown by: 1) the limitation of the liability of the agents to the actual value of the vessel and the freight money; and 2) the right to retain the cargo and embargo and detention of the vessel (Luzon Stevedoring Corp v. CA, 156 SCRA 169);2. Hypothecary - the liability of the owner of the value of the vessel is limited to the vessel itself (Doctrine of Limited Liability).

The real and hypothecary nature of maritime law simply means that the liability of the carrier in connection with losses related to maritime contracts is confined to the vessel, which stands as the guaranty for their settlement. (Aboitiz Shipping Corp. vs. General Accident Fire and Life Assurance Corp. 217 SCRA 359).

MERCHANT VESSEL

Vessel engaged in maritime commerce, whether foreign or otherwise. (Bar Review Materials in Commercial Law, 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. 573, 585) 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 and sold. (Ship Mortgage Decree of 1978)

MARITIME LIEN It constitutes a present right of property in the ship, a jus in re, to be afterward enforced in admiralty by process in rem. (PNB vs. CA, 337 SCRA 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. CA, 337 SCRA 381)

ORDER OF PREFERENCE IN CASE OF SALE OF VESSEL

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

1969 1978Applicability

Overseas shipping only

Both domestic and overseas shipping

Kind of saleJudicial Judicial and

extrajudicialOrder of Preference

A preferred mortgage shall have priority over all claims against the vessel, except the following

The preferred mortgage lien shall have priority over all claims against the vessel, except the following

preferences in the order stated:1. Judicial costs of the proceedings;2. Taxes due the Philippine Government;3. Salaries and wages of the Captain and Crew of the vessel during its last voyage;4. General average or salvage including contract salvage, bottomry loans, and indemnity due shippers for the value of goods transported but which were not delivered to the consignee;5. Costs of repair and equipment of the vessel, and provisioning of food, supplies and fuel during its last voyage; and6. Preferred mortgages registered prior in time.

preferences in the order stated:1. Expenses and fees allowed and costs taxed by the court and taxes due to the Government;2. Crews wages;3. General average;4. Salvage, including contract salvage;5. Maritime liens arising prior in time to the recording of the preferred mortgage;6. Damages arising out of tort; and7. Preferred mortgage registered prior 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. 587 civil liability for indemnities to third persons

2. Art. 590 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

GENERAL RULE: The liability of shipowner and ship agent is limited to the amount of interest in said vessel such that where vessel is entirely lost, the obligation is extinguished. (Luzon Stevedoring v. Escano, 156 SCRA 169) The interest extends to: 1) the vessel itself; 2) equipments; 3) freightage; and 4) insurance proceeds. (Chua v. IAC, 166 SCRA 183)EXCEPTIONS: 1. Claims under Workmens Compensation

(Abueg vs. San Diego 77 Phil 730);2. I njury or damage due to shipowner or to

the concurring negligence of the shipowner and the captain;

3. The vessel is insured (Vasquez vs. CA 138 SCRA 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 were abandonment is dispensed with is when the vessel is entirely lost (Luzon Stevedoring vs. CA 156 SCRA 169).

RIGHT OF SHIPOWNER OR SHIP AGENT TO ABANDON VESSEL

Instances:1. In case of civil liability from indemnities to third persons (Art. 587);2. In case of leakage of at least of the contents of a cargo containing liquids (Art. 687); and3. In case of constructive loss of the vessel (Sec. 138, Insurance Code).

RIGHT OF ABANDONMENT

SHIPOWNER OR SHIP AGENT

CONSIGNEE

What may be abandonedVessel Goods

shippedInstances

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

1. Partial non-delivery, where the goods are useless without the others (Art. 363);2. Goods are rendered useless for sale or consumption for the purposes for which they are properly destined (Art. 365); and3. In case of delay through the fault of the carrier (Art. 371).

Effects1. Transfer of ownership of the vessel from the shipowner to the shippers or insurer.2. In case

1.Transfer of ownership on the goods from the shipper to the carrier.2.Carrier

of (2), the insurer must pay the insured as if there was actual total loss of the vessel.

should pay the shipper the market value of the goods 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 COMMERCEA. Shipowners and ship agentsB. Captains and masters of the vesselC. Officers and crew of the vesselD. SupercargoesE. Pilot

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

Ship agent (naviero) Person entrusted with provisioning and representing the vessel in the port in which it may be found; also includes the shipowner. Not a mere agent under civil law; he is solidarily liable with the ship owner. Powers and functions:1. Capacity to trade;2. Discharge duties of the captain, subject

to Art.609;3. Contract in the name of the owners with

respect to repairs, details of equipment, armament, provisions of food and fuel, and freight of the vessel, and all that relate to the requirements of navigation;

4. Order a new voyage, make a new charter or insure the vessel after obtaining authorization from the shipowner or if 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. 586)

2. Loss and damage to the goods loaded on the vessel without prejudice to their right to free themselves from liability by abandoning the vessel to the creditors. (Art. 587)

Duty of Ship Agent to Discharge the Captain and Members of the Crew If 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 MASTERS They are the chiefs or commanders of

ships. The terms have the same meaning, but are particularly used in accordance with the size of the vessel governed and the scope of transportation, i.e., large and overseas, and small and coastwise, respectively. Nature of position (3-fold character):

1. General agent of the shipowner;2. Technical director of the vessel;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 in discipline;

4. Make contracts for the charter of vessel in the absence of ship agent.

5. Supply, equip, and provision the vessel; and

6. Order repair of vessel to enable it to continue its voyage. (Art. 610)

Sources of funds to comply with the inherent powers of the captain (in successive order):

1. From the consignee of the vessel;2. From the consignee of the cargo;3. By drawing on the ship agent;4. By a loan on bottomry;5. By sale of part of the cargo. (Art. 611)

Duties:1. Bring on board the proper certificate

and documents and a copy of the Code of Commerce;

2. Keep a Log Book, Accounting Book and Freight Book;

3. Examine the ship before the voyage;

4. Stay on board during the loading and unloading of the cargo;

5. Be on deck while leaving 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)

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

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

Classes of Seamans 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 seamans 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 PilotGENERAL 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: 1. Accident caused by force majeure or natural calamity provided the pilot exercised prudence and extra diligence to prevent or minimize damages. 2. Countermand or overrule by the master of the vessel in which case the registered owner of the vessel is liable. (Sec.11, Art.III PPA 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. CA, 226 SCRA 476) 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 when the cause arises from the unworthiness of the vessel. The shipowner leases to the charterer the whole vessel, transferring to the latter the entire command, possession and consequent control over the vessels navigation, including the master and the crew, who thereby become the charters 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 charterer is treated as owner pro hac vice, the charterer assumes the customary rights and liabilities of the shipowner to third persons and is held liable for the expense of the voyage and the wages of the seamen.

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. Kinds: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 PARTY

If for a definite period, lessee cannot give up the lease by paying a portion of the amount agreed upon.

Charterer may rescind charter party by paying half of the freightage agreed upon.

If the leased property is sold to one who knows of the existence of the lease, the new owner must respect the lease.

The new owner is not compelled to respect the charter party so long as he can load the vessel with his own cargo. (Art. 689)

Civil law concept

Commercial law concept

CHARTER PARTY

BILL OF LADING

An entire or complete contract.

More like a private receipt which the captain gives to accredit goods received from persons

Consensual contract

Real contract

BAREBOAT OR DEMISE CHARTER

CONTRACT OF

AFFREIGHTMENT (TIME OR

VOYAGE CHARTER)

Charterer becomes liable to others caused by its negligence

Owner remains liable as carrier and must answer for any breach of duty

Charterer regarded as owner pro hac vice for the voyage

Charterer is not regarded as owner.

Owner of vessel relinquishes possession, command and navigation to

The vessel owner retains possession, command and navigation of the ship

charterer

Common carrier is converted to private carrier.

Common carrier is not converted to a private carrier.

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 vessel

2. Charterer may subcharter entire vessel to 3rd 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.598)

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 latters interests. (Art.609)

REQUISITES OF A VALID CHARTER PARTY

1. Consent of the contracting parties2. Existing vessel which should be

placed at the disposition of the shipper3. Freight4. Compliance with Art. 652 of the Code

of Commerce

Clauses Which May Be Included In a Charter Party

Jason clause Clause paramount or

paramount clause

A stipulation in a charter party that in case of a maritime accident for which the shipowner is not responsible by law, contract or otherwise, the cargo shippers, consignees or owners shall contribute with the shipowner in general average. (Pandect of Commercial Law and Jurisprudence, Justice Jose Vitug, 1997 ed.)

A clause in a charter party providing that the COGSA shall apply, even though the transportation is domestic, subject to the extent that any term of the bill of lading is repugnant to the COGSA or applicable law, then to the extent thereof the provision of the bill of lading is void. (Pandect of Commercial Law and Jurisprudence, Justice Jose Vitug, 1997 ed.)

Rights and Obligations of Parties

SHIPOWNER OR SHIP AGENT

CHARTERER

1. If the vessel is chartered wholly, not to accept cargo from others;2. To observe represented capacity;3. To unload cargo clandestinely placed4. To substitute another vessel if load is less

1. To pay the agreed charter price;2. To pay freightage on unboarded cargo;3. To pay losses to others for loading uncontracted cargo and illicit cargo;4. To wait if the vessel

than 3/5 of capacity;5. To leave the port if the charterer does not bring the cargo within the lay days and extra lay days allowed;6. To place in a vessel in a condition to navigate;7. to bring cargo to nearest neutral port in case of war or blockade. (Arts. 669-678)

needs repair;5. To pay expenses for deviation. (Arts. 679-687)

Rescission of a Charter PartyAt

charterers

request(Art 688)

At shipown

ers request

(Art. 689)

Fortuitous

causes(Art. 690)

1. By abandoning the charter and paying half of the freightage;2. Error in tonnage or flag;3. Failure to place the vessel at the charterer

1. If the extra lay days terminate without the cargo being placed alongside the vessel;2. Sale by the owner of the vessel before loading by the charterer

1. War or interdiction of commerce;2. Blockade;3. Prohibition to receive cargo;4. Embargo; and5. Inability of the vessel to

s disposal;4. Return of the vessel due to pirates, enemies or bad weather;5. Arrival at a port for repairs.

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

It is not dependent on the ownership of the transporting ships or in 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 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. (Magellan Manufacturing vs. CA, 201 SCRA 102)

LOAN ON BOTTOMRY AND RESPONDENTIA A 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.

LOAN ON BOTTOMRY

LOAN ON RESPONDEN

TIADefinition

Loan made by shipowner or ship agent guaranteed by vessel itself and repayable upon arrival of vessel at destination. (Art. 719)

Loan taken on security of the cargo laden on a vessel, and repayable upon safe arrival of cargo at destination. (Art. 719)

Who may contractShipowner or ship agent. Outside of the residence of the owners - the captain.

Only the owner of the cargo.

Common elements:1. Exposure of security to

marine peril;

2. Obligation of the debtor conditioned only upon safe arrival of the security at the point of destination.

Forms:1. Public instrument2. Policy signed by the

contracting parties and the broker taking part therein

3. Private instrument (Art. 720)

Contents:1. Kind, 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/ RESPONDEN

TIA

ORDINARY LOAN

(MUTUUM)Not subject to Usury Law

Subject to Usury Law

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

Not subject to any contingency (absolute liability)

The last lender is a preferred creditor

The first lender is a preferred creditor

WHEN LOAN ON BOTTOMRY OR RESPONDENTIA REGARDED AS SIMPLE LOAN

1. 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. (ART.727)

3. If the effects on which the money is taken is not subjected to any risk. (ART.729)

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

MARINE INSURANCE

LOAN ON BOTTOMR

Y OR RESPOND

ENTIAIndemnity is paid after the loss has occurred

Indemnity is paid in advance by way of a loan

In case of loss of the vessel due to a risk insured against, the obligation of the insurer becomes absolute

In case of loss of the vessel due to a marine peril, the obligation of the borrower to pay is extinguished

Consensual contract

Real contract

Hypothecary Nature of Bottomry/ RespondentiaGENERAL RULE: The obligation of the borrower to pay the loan is extinguished if

the goods given as security are absolutely lost by reason of an accident of the sea, during the voyage designated, and if it is proven that the goods were on board.EXCEPTIONS:1. Loss due to inherent defect;2. Loss due to 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/Respondentia

1. 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 likewise of an insurance coverage to the extent of the loan accommodation. The same rule would apply to the hypothecation of the cargo by respondentia. (Pandect of Commercial Law and Jurisprudence, Justice Jose Vitug, 1997 ed.)

ACCIDENTS IN MARITIME COMMERCE1. Averages 2. Arrival Under Stress 3. Collision 4. Shipwreck

AVERAGE An extraordinary or accidental expense incurred during the voyage in order to preserve the cargo, vessel or both, and all damages or deterioration suffered by the vessel from departure to the port of

destination, and to the cargo from the port of loading to the port of consignment. (Art. 806) The person whose property has been saved must contribute to reimburse the damage caused or expense incurred if the situation constitutes 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 particular average. Expenses incurred to refloat a vessel, which accidentally ran aground, in order to continue its voyage, do not constitute general average. Not only is there absence of a marine peril, common safety factor, and deliberateness. It is the safety of the property, and not the voyage, which constitutes the true foundation of general average. (A. Magsaysay, Inc. vs. Agan, G.R.No. L-6393, Jan. 31, 1955)

PARTICULAR OR SIMPLE

GROSS OR GENERAL

DefinitionDamages or expenses caused to the vessel or cargo that did not inure to the common benefit, and borne by respective owners. (Art. 809)

Damages or expenses deliberately caused in order to save the vessel, its cargo or both from real and known risk. (Art. 811)

Requisites1. common

danger; 2. deliberate

sacrifice; 3. success; 4. proper

formalities and legal

steps.Liability

The owner of the goods which gave rise to the expense or suffered the damage shall bear this average. (Art. 810)

All the persons having an interest in the vessel and the cargo therein at the time of the occurrence of the average shall contribute to satisfy this average. (Art. 812) The insurers (Art.859) and lenders on bottomry and respondentia shall likewise contribute. (Art.732).

Number of interests involvedOnly one interest involved

Several interests involved

Share in the damage or expense

100% share In proportion to the value of the owners property saved

Right to recoverNo reimbursement

There may be reimbursement

Kinds (not exclusive)Art. 809 Art. 811

Procedure for recovery1.Assembly and deliberation2.Resolution of the captain3.Entry of the

resolution in the logbook4.Detailed minutes5.Delivery of the minutes to the maritime judicial authority of the first port, within 24 hours from arrival,6.Ratification by captain under oath. (Arts. 813-814)

GOODS NOT COVERED BY GENERAL AVERAGE EVEN IF SACRIFICED

1. Goods carried on deck. (ART.855)2. Goods not recorded in the books or

records of the vessel. (ART.855 (2))3. Fuel for the vessel if there is more

than sufficient fuel for the voyage. (Rule IX, York-Antwerp Rule)

Jettison Act 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. 815)

Jettisoned goods are not res nullius nor deemed abandoned within the meaning of civil law so as to be the object of occupation by salvage. (Pandect of Commercial Law 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 be proven 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/foreign shipping.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 average and 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 is exposed for many days to perils of the sea.

DOMESTIC INTERNATIONAL

Deck cargo is allowed

Deck cargo is not allowed

With shippers consentGeneral average

Particular average

Without shippers consentCaptain is

liableCaptain 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

When unlawful

Who bears expenses:

The inability to continue voyage is due to lack of provisions, well-founded fear of seizure, privateers, pirates, or accidents of the sea disabling it to navigate. (Art. 819)

1. Lack of provisions due to negligence to carry according to usage and customs;2. Risk of enemy not well known or manifest3. Defect of vessel due to improper repair; and4. Malice, negligence, lack of foresight or skill of captain. (Art. 820)

The shipowner or ship agent is liable in case of unlawful arrival under stress. But they shall not be liable for the damages caused by reason of a lawful 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 in such duty renders him liable. However, in case the cause has been risk of enemies, there must first be an assembly before departure. (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 captain shall 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.

COLLISION Impact of two vessels both of which are moving.

Allision Impact between a moving vessel and a stationary one.

Nautical Rules to Determine Negligence 1. 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 sail 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 was fear 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. CA)

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 as to 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 zone all time up to the moment when risk of collision begins. No rule is as yet applicable for none is necessary.2. Second zone time between moment when risk of collision begins and moment it becomes a practical certainty. 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 zone time when collision is certain and time of impact. An error in this zone would no longer be legally consequential. Error in Extremis - sudden movement made by a faultless vessel during the third zone of collision with another vessel which is at fault during the 2nd zone. Even if such sudden movement is wrong, no responsibility will fall on said faultless vessel. (Urrutia and Co. v. Baco River Plantation Co., 26 PHIL 632)

Cases Covered By Collision and Allision1. One vessel 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. Both vessels 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. Vessel at fault not known 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)

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

4. Third vessel at fault The third vessel will be liable for losses and damages. (Art. 831)5. Fortuitous event/force majeure No 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. CA, Luzon Stevedoring vs. CA)

Even if the cause of action against the common carrier is based on quasi-delict, the defense of due diligence in the selection and supervision of employees is unavailing in case of a maritime tort resulting in collision. It is not a civil tort governed by the Civil Code but 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 the Code of Commerce. (Notes and Cases on the Law on Transportation and Public Utilities, Aquino, T. & Hernando, R.P. 2004 ed.)

MARITIME PROTEST Condition precedent or prerequisite to recovery of damages arising from collisions

and other maritime accidents. It is a written statement made under oath by the captain of a vessel after the occurrence of an accident or disaster in which the vessel or cargo is lost or damaged, with respect to the circumstances attending such occurrence, for the purpose of recovering losses 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 be protested. (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 CONCEPTSARRASTRE 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/ SHIPPERS 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; and3. 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 carriers liability2. Notice of damage3. Prescriptive period

AMOUNT OF CARRIERS 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)

IV. WARSAW CONVENTION OF 1929 (WC)

PURPOSE: To protect the emerging air transportation industry and to secure the uniformity of recovery by the passengers.APPLICABILITY The transportation must be:

1. International transportation;2. Air transportation; and3. Carriage of passengers, baggage or

goods. The WC shall also apply to fortuitous transportation by aircraft performed by an air transportation enterprise.

International transportation - any transportation in which the place of departure and the place of destination are situated either:

1. Within the territories of two High Contracting Parties regardless of whether or not there be a break in the transportation or transshipment, or 2. Within the territory of a single High Contracting Party, if there is an agreed stopping place within a territory subject to the sovereignty, mandate or authority of another power, even though that power is not a party to the Convention. (round trip, Am. Jur.)

Transportation to be performed by several successive air carriers shall be deemed to be one undivided transportation, if it has been regarded by the parties as a single operation, whether it has been agreed upon under the form of a single contract or of a series of contracts, and it shall not lose its international character merely because one contract or a series of contracts is to be performed entirely within a territory subject to the sovereignty, suzerainty, mandate, or authority of the same High Contracting Party. (Art. 1 Sec.3)

WHEN INAPPLICABLE1. When public policy is contradicted;2. If the requirements under the

Convention are not complied with.

IMPORTANT CONCEPTS:1. Transportation documents

a. Passenger ticketb. Baggage checkc. Air way bill

2. Liability of the carrier for damagesa. Death or injury to passengersb. Loss or damage to baggage or goodsc. Delay

3. Successive carrier agreeme

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