Transpo Q&A

8/13/2019 Transpo Q&A

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TRANSPORTATION LAWS

CONTRACT OF TRANSPORTATION/ CARRIAGEFA 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.

FClassifications:Common or PrivateGoods or PassengersFor a fee (for hire) or GratuitousLand, Water/maritime, or AirDomestic/inter-island/coastwise or International/foreign

?It is a relationship which is imbued with the public interest.

COMMON CARRIER

FPersons, corporations, firms or associations engaged in the business of carrying or transporting passengers or goods orboth, 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 distinctionbetween a person or enterprise offering transportation service on a regular or scheduled basis and one offering such service onan occasional, episodic or unscheduled basis.

Neither does the law distinguish between a carrier offering its services to the general public that is the general communityor 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 thetransportation 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).

FCharacteristics: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

FOne which, without being engaged in the business of carrying as a public employment, undertakes to deliver goods orpassengers for compensation. (Home Insurance Co. vs. American Steamship Agency, 23 SCRA 24)

?TESTS WHETHER CARRIER IS COMMON OR PRIVATE:

FThe SC in First Philippine Industrial Corporation vs. CA (1995) reiterated the following tests:It must be engaged in the business of carrying goods for others as a public employment and must hold itself out asready to engage in the transportation of goods generally as a business and not as a casual occupation;It must undertake to carry goods of the kind to which its business in confined;It must undertake to carry by the method by which his business is conducted and over its established roads; and

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 orpassengers provided it has space for all who opt to avail themselves of its transportation for a fee.

COMMON CARRIER

PRIVATECARRIER

1. As to availability

Holds himself out for allpeople indiscriminately

Contracts with particularindividuals or groups only

2. As to required diligence

Extraordinary diligence isrequired

Ordinary diligence is required

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3. As to regulation

Subject to State regulat ion Not subject to State regulation

4. Stipulation limiting liability

Parties may not agree onlimiting the carriers liabilityexcept when provided by law

Parties may limit the carriersliability, provided it is notcontrary to law, morals orgood customs

5. Exempting circumstance

Prove extraordinary diligenceand Art. 1733, NCC

caso fortuito, Art. 1174 NCC

6.Presumption of negligence

There is a presumption of fault

or negligence

No presumption of fault or

negligence7.Governing law

Law on common carriers Law on obligations andcontracts

GOVERNING LAWSA. Domestic/inter-island/coastwise

FApplicable to Land, Water, and Air transportation1. Civil Code - primary2. Code of Commerce (Arts. 349, 379, 573-734, 580, 806-845) - suppletory

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

FApplicable 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

FRendition of service with the greatest skill and utmost foresight. (Davao Stevedore Co. v. Fernandez)FRationale:

From the nature of the business and for reasons of public policy (Art. 1733)Relationship of trust

Business is impressed with a special public dutyPossession of the goodsPreciousness of human life

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

COVERAGE

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

PASSENGER

FA person who has entered into a contract of carriage, express or implied, with the carrier. They are entitled to extraordinarydiligence from the common carrier.

?The following are not considered passengers, and are entitled to ordinary diligence only:One who has not yet boarded any part of a vehicle regardless of whether or not he has purchased a ticket;One who remains on a carrier for an unreasonable length of time after he has been afforded every safe opportunity

to alight;One who has boarded by fraud, stealth, or deceit;One who attempts to board a moving vehicle, although he has a ticket, unless the attempt be with the knowledgeand consent of the carrier;One who has boarded a wrong vehicle, has been properly informed of such fact, and on alighting, is injured by thecarrier;Invited guests and accommodation passengers. (Lara vs. Valencia)One who rides any part of the vehicle which is unsuitable or dangerous or which he knows is not designed orintended for passengers.

DEFENSES OF A COMMON CARRIER IN THE CARRIAGE OF GOODSCASO FORTUITO/FORCE MAJEURE

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

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?Fire is not considered a natural disaster or calamity as it arises almost invariably from some act of man. (Eastern ShippingLines Inc. vs. IAC)

?Mechanical defects are not force majeure if the same was discoverable by regular and adequate inspections. (Notes andCases on the Law on Transportation and Public Utilities, Aquino, T. & Hernando, R.P. 2004 ed. p.120-122)

2. ACTS OF PUBLIC ENEMY

FRequisites:Must be the proximate and only cause of the lossExercise of due diligence to prevent or minimize the loss before, during or afterthe 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 defenseb. Contributory: partial defense. (Art. 1741)

4. CHARACTER OF THE GOODS OR DEFECTS IN THE PACKING OR IN THE CONTAINER

FEven if the damage should be caused by the inherent defect/character of the goods, the common carrier must exercise duediligence to forestall or lessen the loss.(Art. 1742)

FThe carrier which, knowing the fact of improper packing of the goods upon ordinary observation, still accepts the goodsnotwithstanding such condition, is not relieved of liability or loss or injury resulting therefrom. (Southern Lines, Inc. v. CA, 4SCRA 258)

5. ORDER OR ACT OF PUBLIC AUTHORITYFSaid public authority must have the power to issue the order (Art. 1743). Consequently, where the officer acts withoutlegal 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 adefense by the common carrier because the liability of the carriers arises from the breach of the contract of carriage. Thedefense under said articles is applicable to negligence in quasi-delicts under Art. 2176. (Del Prado v. Manila Electric Co., 52Phil 900)

LIABILITY OF A COMMON CARRIER FOR

DEATH OR INJURIES TO PASSENGERS DUE TO ACTS OF ITS EMPLOYEES AND OTHER PASSENGERS ORSTRANGERS

FOR ACTS OF ITSEMPLOYEES

FOR ACTS OF OTHERPASSENGERS OR

STRANGERS

Required diligence and defense

Extraordinary diligence Ordinary diligence

Nature of liability

Tort; however,The employee must be on dutyat 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 vehicleresulting to the injuries suffered by the other passengers. (MRR vs. Ballesteros, 16 SCRA 641)

CARRIAGE OF GOODS

CARRIAGE OF PASSENGERS

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Parties

Common carrierShipperConsignee

Common carrierPassenger

Cause of liability

Delay 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 thepossession of, and received by the carrier for transportation untilthe same are delivered actually or constructively by the carrierto the consignee or to the person who has the right to receivethem. (Art. 1736)

F It remains in full force and effect even when they aretemporarily unloaded or stored in transit unless the shipper or

owner has made use of the right of stoppage in transitu. (Art.1737)

FIt continues to be operative even during the time the goodsare stored in a warehouse of the carrier at the place ofdestination until the consignee has bee advised of the arrival ofthe goods and has had reasonable opportunity thereafter toremove 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)

The duty of a common carrier to provide safety to itspassengers so obligates it not only during the course of thetrip, but for so long as the passengers are within its premisesand where they ought to be in pursuance to the contract ofcarriage. (LRTA v. Navidad, [2003])

F All persons who remain on the premises within areasonable time after leaving the conveyance are to be deemed

passengers, and what is a reasonable time or a reasonabledelay within this rule is to be determined from all thecircumstances, and includes a reasonable time to see after hisbaggage and prepare for his departure. (La Mallorca v. CA, 17SCRA 739 ; Abiotiz Shipping Corporation v. CA, 179 SCRA95)

FIt is the duty of common carriers of passengers to stop theirconveyances a reasonable length of time in order to affordpassengers an opportunity to enter, and they are liable forinjuries suffered from the sudden starting up or jerking of theirconveyances while doing so. The duty which the carrier ofpassengers owes to its patrons extends to persons boarding thecars as well as to those alighting therefrom (Dangwa TransCo., Inc. vs. CA 202 SCRA 574).

Presumption of negligence

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

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

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

Defenses

Ordinary circumstance: Exercise of extraordinarydiligence (Art. 1735)Special circumstances:

Flood, storm,earthquake,lighting, or othernatural disaster orcalamity (plusforce majeure)Act of the publicenemy in war,whetherinternational orcivilAct or omission ofthe shipper or theowner of goodsThe character ofthe goods ordefects in thepacking or in thecontainersOrder or act ofcompetent publicauthority (Art.1734)

Exercise of extraordinary diligence (Art.1756)Caso fortuito

Valid stipulations

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

In writing, signed by the shipper or owner;

Supported by a valuable consideration otherthan the service rendered by the carriers; andReasonable, just and not contrary to publicpolicy. (Art. 1744)

2. Fixed amount of liability: A contract fixing the sum to berecovered by the owner or shipper for the loss, destruction ordeterioration of the goods, if it is reasonable and just under thecircumstances and has been fairly and freely agreed upon. (Art.1750)3. Limited liability for delay: An agreement limiting thecommon carriers liability for delay on account of strikes orriots (Art. 1748)4. Stipulation limiting liability to the value of the goodsappearing in the bill of lading, unless the shipper or ownerdeclares 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

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

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diligence or diligence of a good father of a family. (Art. 1744,Art. 1745, no. 4)

Void stipulations

That the goods aretransported at the risk of theowner or shipper;

That carrier will not beliable for any loss,destruction or deteriorationof the goods;That the carrier need notobserve any diligence in thecustody of the goods;That the carrier shallexercise a degree ofdiligence less than that of agood father of a family overthe movable transported;That the carrier shall not beresponsible for the acts oromissions of his or itsemployees;That the carriers liabilityfor acts committed bythieves or robbers who donot act with grave or

irresistible threat, violenceor force is dispensed withor diminished;That the carrier is notresponsible for the loss,destruction or deteriorationof the goods on account ofthe defective condition ofthe car, vehicle, ship orother equipment used in thecontract of carriage. (Art.1745)

Dispensing with or lessening the extraordinary responsibilityof a common carrier for the safety of passengers imposed bylaw by stipulation, by posting of notices, by statements on

tickets or otherwise. (Art. 1757)

RULES ON PASSENGERS BAGGAGE

IN THE CUSTODY OF THEPASSENGERS

(HAND-CARRIED)

IN THE CUSTODY OFTHE 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 rules

Arts. 1998 and 2000-2003 Arts. 1733-1753

CONCURRING CAUSES OF ACTION ARISING FROM THE NEGLIGENT ACT OF THE COMMON CARRIER

1. Culpa contractual(breach of contract)

FOnly the carrier is primarily liable and not the driver, because there is no privity between the driver and the passenger.FBasis: Art.1759, NCC.FNo defense of due diligence in the selection and supervision of employees.

2. Culpa aquiliana (quasi-delict)FThe carrier and driver are solidarily liable as joint tortfeasors.FBasis: Art. 2180, NCC.FDefense of due diligence in the selection and supervision of employees is available. Exception: maritime tort resulting incollision. (See notes on Collision)

3. Culpa criminal (criminal negligence)

FThe driver is primarily liable. The carrier is subsidiarily liable only if the driver is convicted and declared insolvent.FBasis: Art. 100, RPC.

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?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 ofanother vehicle, the drivers as well as the owners of the two vehicles are jointly and severally liable for damages. It makes nodifference that the liability of the bus driver and owner springs from contract while that of the owner and driver of the othervehicle arises from quasi-delict. (Fabre vs. CA)

LIMITATIONS AS TO CARRIERS LIABILITY

INVALID AS BEINGCONTRARY TO PUBLIC

POLICY

VALID &ENFORCEABLE

1. One exempting the carrier

from any and all liability for

loss or damage occasioned byits own negligence.2. An unqualified limitation ofliability to an agreed valuation.

1. One limiting the liability

of the carrier to an agreed

valuation, unless the shipperdeclares a higher value andpays a higher rate of freight(H.E. Heacock Company vs.Macondray & CompanyInc.)

FHowever, the carrier cannot limit its liability for injury to, or loss of, goods shipped where such injury or loss was causedby 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 thecarrier 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 itsstranded 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 ifthey 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 liableif 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 beheld 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 theissuing carrier liable for the tortuous conduct of the other carrier. A printed provision in the ticket limiting liability only to itsown conduct is not enough to rebut that liability. (KLM Royal Dutch Airlines vs. CA, 65 SCRA 237)

II. CODE OF COMMERCE

OVERLAND TRANSPORTATION

(Arts. 349-379)

Applicability

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

IMPORTANT CONCEPTS:

Bill of ladingObligations of the carrierRight of abandonmentNotice of damageCombined carrier agreement

BILL OF LADING

FThe written acknowledgment of receipt of goods and agreement to transport them to a specific place to a person named orto his order.

FRules: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 thestipulations 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 betweenthe shipper and the carrier, springs from either a relation of agency between him and the shipper, or his status as stranger inwhose favor some stipulation is made in said contract, and who becomes a party thereto when he demands fulfillment of thatstipulation. (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 theknowledge of the shipper and agreed to by him and, in the absence of fraud or mistake; he is estopped from thereafter denyingthat he assented to such terms. (Notes and Cases on the Law on Transportation and Public Utilities, Aquino, T. & Hernando,

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R.P. 2004 ed. p.261)

FKinds:

On board - issued when the goods have been actually placed aboard the ship with very reasonable expectation thatthe shipment is as good as on its way.

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

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.Non-negotiable - One in which it is stated that the goods referred to therein will be delivered to a specified person.Clean One which does not indicate any defect in the goods.

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

Spent One which covers goods that already have been delivered by the carrier without a surrender of a signedcopy of the bill.Through One issued by the carrier who is obliged to use the facilities of other carriers as well as his own facilitiesfor the purpose of transporting the goods from the city of the seller to the city of the buyer, which bill of lading ishonored by the second and other interested carriers who do not issue their own bills.Custody One wherein the goods are already received by the carrier but the vessel indicated therein has not yetarrived in the port.

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

FFunctions:Best evidence of the existence of the contract of carriage of cargo (Art. 353)Document of titleReceipt of cargoContract to transport and deliver goods as stipulatedSymbol of the goods

OBLIGATIONS OF THE CARRIERA. Duty to accept the goods

!GENERAL 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 ingood condition as when it was loaded. (PAL vs. CA)

B. Duty to deliver the goods

FNot only to transport the goods safely but to the person indicated in the bill of lading. The goods should be delivered tothe consignee or any other person to whom the bill of lading was validly transferred or negotiated.

Time of delivery

Stipulated in Contract/Billof Lading

No stipulation

1. Carrier is bound to fulfillthe contract and is liable forany delay; no matter from

what cause it may have arisen.

1. Within a reasonable time.2. Carrier is bound to forward

them in the 1stshipment of the

same or similar goods whichhe may make to the point ofdelivery. (ART. 358 Code ofCommerce)

Effects of delay

Merely suspends and generally does not terminate the contract of carriageCarrier remains duty bound to exercise extraordinary diligenceNatural disaster shall not free the carrier from responsibility (Art.1740)If delay is without just cause, the contract limiting the common carriers liability cannot be availed of incase of loss or deterioration of the goods (Art.1747)

RIGHT OF CONSIGNEE TO ABANDON GOODS

FInstances:Partial non-delivery, where the goods are useless without the others (Art. 363);

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Goods are rendered useless for sale or consumption for the purposes for which they areproperly destined (Art. 365); andIn case of delay through the fault of the carrier (Art. 371).

NOTICE OF DAMAGE (ART. 366)

FRequisites for applicability:

Domestic/inter-island/coastwise transportationLand/water/air transportationCarriage of goodsGoods shipped are damaged

FRules: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)

FPurpose of notice:To inform the carrier that the shipment has been damaged, and it is charged with liability therefore, andto give it an opportunity to make an investigation and fix responsibility while the matter is fresh.

FThe 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 theliability of the carrier. (PHILAMGEN vs. Sweetlines, Inc.)Prescriptive Period

FNot provided by Article 366. Thus, in such absence, Civil Code rules on prescription apply.FIf despite the notice of claim, the carrier refuses to pay, action must be filed in court.

No bill of lading was issued: within 6 yearsBill of lading was issued: within 10 years.

ARTICLE 366 COGSA Sec.3 (6)

Applicability

Domestic/inter-island/coastwisetransportationLand, water,airtransportationCarriage ofgoods

International/overseas/foreign (fromforeign country to Phils.)Note: subject to the rule onParamount Clause2. Water/maritimetransportation3. Carriage of goods

Notice of damage

Conditio

nprecedent24-hourperi

odforclaiminglatentd

Notacond

itionprecedent3-daype

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amage

tdamage

Prescriptive period

None provided; Civil Codeapplies.

One year from the date ofdelivery (delivered butdamaged goods), or datewhen the vessel left port orfrom the date of delivery tothe arrastre (non-delivery orloss).

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 inthe contract.

!EXCEPTION:A combined carrier agreement where a carrier makes itself liable assuming the obligations and acquiring aswell the rights and causes of action of those which preceded it.

MARITIME COMMERCE

(Arts. 573-869)

IMPORTANT CONCEPTS:

Merchant vesselMaritime lien and Preference of CreditDoctrine of limited liability

Causes of revocation of voyageParticipants in maritime commerceCharter partyLoans on bottomry and respondentiaAccidents in maritime commerce

MARITIME/ADMIRALTY LAW

FIt 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 JoseVitug, 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 throughregistration. (Rubiso vs. Rivera, 37 Phil. 72). The evidence of real nature is shown by: 1) the limitation of the liability of theagents to the actual value of the vessel and the freight money; and 2) the right to retain the cargo and embargo and detention ofthe 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 lossesrelated to maritime contracts is confined to the vessel, which stands as the guaranty for their settlement. (Aboitiz ShippingCorp. vs. General Accident Fire and Life Assurance Corp. 217 SCRA 359).

MERCHANT VESSELFVessel engaged in maritime commerce, whether foreign or otherwise. (Bar Review Materials in Commercial Law, Jorge

Miravite, 2002 ed.)

FConstitutes property which may be acquired and transferred by any of the means recognized by law. They shall continue tobe considered as personal property. (Arts. 573, 585)

FThey are susceptible to maritime lienssuch as for the repair, equipping and provisioning of the vessel in the preparation ofa voyage, as well as mortgage liabilities, in satisfaction of which a vessel may be validly arrested and sold. (Ship MortgageDecree of 1978)

MARITIME LIEN

FIt 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)

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FIf 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. 1521

Effectivity date

1969 1978

Applicability

Overseas shipping only Both domestic and overseas

shippingKind of sale

Judicial Judicial and extrajudicial

Order of Preference

A preferred mortgage shallhave priority over all claimsagainst the vessel, except thefollowing preferences in theorder stated:1. Judicial costs of theproceedings;2. Taxes due the PhilippineGovernment;3. Salaries and wages of theCaptain and Crew of thevessel during its last voyage;4. General average or salvageincluding contract salvage,bottomry loans, andindemnity due shippers forthe value of goodstransported but which werenot delivered to theconsignee;5. Costs of repair andequipment of the vessel, andprovisioning of food,supplies and fuel during itslast voyage; and6. Preferred mortgagesregistered prior in time.

The preferred mortgage lienshall have priority over allclaims against the vessel,except the followingpreferences in the orderstated:1. Expenses and fees allowedand costs taxed by the courtand taxes due to theGovernment;2. Crews wages;3. General average;4. Salvage, includingcontract salvage;5. Maritime liens arisingprior in time to the recordingof the preferred mortgage;6. Damages arising out oftort; and7. Preferred mortgageregistered 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 salesubject to the order of preference.

DOCTRINE OF LIMITED LIABILITY(HYPOTHECARY RULE)

FCases where applicable:Art. 587 civil liability for indemnities to third personsArt. 590 indemnities from negligent acts of the captain (not the shipowner or ship agent)Art. 837 collisionArt. 643 liability for wages of the captain and the crew and for advances made by theship 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 thatwhere vessel is entirely lost, the obligation is extinguished. (Luzon Stevedoring v. Escano, 156 SCRA 169) The interestextends to: 1) the vessel itself; 2) equipments; 3) freightage; and 4) insurance proceeds. (Chua v. IAC, 166 SCRA 183)

!EXCEPTIONS:Claims under Workmens Compensation (Abueg vs. San Diego 77 Phil 730);Injury or damage due to shipowner or to the concurring negligence of the shipowner and the captain;The vessel is insured (Vasquez vs. CA 138 SCRA 553).Expenses for repair on vessel completed before loss;In case there is no total loss and the vessel is not abandoned;

Collision between two negligent vessels;

?Abandonment of the vessel is necessary to limit the liability of the shipowner. The only instance were abandonment isdispensed with is when the vessel is entirely lost (Luzon Stevedoring vs. CA 156 SCRA 169).

RIGHT OF SHIPOWNER OR SHIP AGENT TO ABANDON VESSEL

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

RIGHT OF ABANDONMENT

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SHIPOWNER OR SHIP

AGENT

CONSIGNEE

What may be abandoned

Vessel Goods shipped

Instances

1. In case of civil liabilityfrom indemnities to thirdpersons (Art. 587);2. Sec. 138, Insurance Code;3. In case of leakage of at least" of the contents of a cargocontaining liquids (Art. 687)

1. Partial non-delivery,where the goods are uselesswithout the others (Art. 363);2. Goods are rendereduseless for sale orconsumption for thepurposes for which they areproperly destined (Art. 365);and3. In case of delay throughthe fault of the carrier (Art.371).

Effects

Transfer ofownership of thevessel from theshipowner to theshippers or insurer.In case of (2), theinsurer must paythe insured as ifthere was actualtotal loss of thevessel.

Transfer ofownershipon the goodsfrom theshipper tothe carrier.Carriershould paythe shipperthe marketvalue of thegoods at thepoint ofdestination.

CAUSES OF REVOCATION OF VOYAGEWar or interdiction of commerce;Blockade;Prohibition to receive cargo at destination;Embargo;Inability of the vessel to navigate. (Art. 640)

Terms:

Interdiction of commerce A governmental prohibition of commercial intercourseintended to bring about an entire cessation for the time being of all trade whatever.Blockade A sort of circumvallation of a place by which all foreign connection andcorrespondence is, as far as human power can effect it, to be cut off.Embargo A proclamation or order of a state, usually issued in time of war or threatenedhostilities, prohibiting the departure of ships or goods from some or all the ports of suchstate 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)

FPerson who has possession, control and management of the vessel and the consequent right to direct her navigation andreceive freight earned and paid, while his possession continues.

Ship agent (naviero)

FPerson entrusted with provisioning and representing the vessel in the port in which it may be found; also includes theshipowner.

FNot a mere agent under civil law; he is solidarily liable with the ship owner.

FPowers and functions:Capacity to trade;Discharge duties of the captain, subject to Art.609;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;Order a new voyage, make a new charter or insure the vessel after obtaining authorization from the shipowner or ifgranted in certificate of appointment.

Civil Liabilities of the Shipowner And Ship Agent

All contracts of the captain, whether authorized or not, to repair, equip and provision the vessel; (Art. 586)Loss and damage to the goods loaded on the vessel without prejudice to their right to free themselves from liability byabandoning the vessel to the creditors. (Art. 587)

Duty of Ship Agent to Discharge the Captain and Members of the Crew

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FIf the seamen contract is not for a definite period or voyage, he may discharge them at his discretion. (Art. 603)

FIf for a definite period, he may not discharge them until after the fulfillment of their contracts, except on the followinggrounds:

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

B. CAPTAINS AND MASTERS

FThey are the chiefs or commanders of ships.FThe terms have the same meaning, but are particularly used in accordance with the size of the vessel governed and thescope of transportation, i.e., large and overseas, and small and coastwise, respectively.

FNature of position (3-fold character):General agent of the shipowner;Technical director of the vessel;Representative of the government of the country under whose flag he navigates.

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

FInherent powers:Appoint crew in the absence of ship agent;Command the crew and direct the vessel to its port of destination;Impose correctional punishment on those who, while on board vessel, fail to comply with his orders or are wanting indiscipline;Make contracts for the charter of vessel in the absence of ship agent.Supply, equip, and provision the vessel; andOrder repair of vessel to enable it to continue its voyage. (Art. 610)

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

FDuties:Bring on board the proper certificate and documents and a copy of the Code of Commerce;Keep a Log Book, Accounting Book and Freight Book;Examine the ship before the voyage;Stay on board during the loading and unloading of the cargo;Be on deck while leaving or entering the port;Protest arrivals under stress and in case of shipwreck;

Follow instructions of and render an accounting to the ship agent;Leave the vessel last in case of wreck;Hold in custody properties left by deceased passengers and crew members;Comply with the requirements of customs, health, etc. at the port of arrival;Observe rules to avoid collision;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 andof its crew and cargo specifically requires on a stipulated ocean voyage (Inter-Orient Maritime Enterprises Inc. vs. CA).

FNo liability for the following:

Damages caused to the vessel or to the cargo by force majeure;Obligations contracted for the repair, equipment, and provisioning of the vessel unless he has expressly bound himselfpersonally 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

Damages to vessel and to cargo due to lack of skill and negligence;Thefts and robberies of the crew;Losses and fines for violation of laws;Damages due to mutinies;Damages due to misuse of power;For deviations;For arrivals under stress;Damages due to non-observance of marine regulations. (Art. 618)

C. OFFICERS AND CREW

Sailing Mate/First MateSecond MateEngineersCrew

FNo liability under the following circumstances:If, before beginning voyage, captain attempts to change it, or a naval war with the power to which the vessel was

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destined occurs;

If a disease breaks out and be officially declared an epidemic in the port of destination;If the vessel should change owner or captain. (Art. 647)

Sailing Mate/First Mate

FSecond 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)

FDuties:Provide himself with maps and charts with astronomical tables necessary for the discharge of his duties;

Keep the Binnacle Book;Change the course of the voyage on consultation with the captain and the officers of the boat, following the decision ofthe captain in case of disagreement;Responsible for all the damages caused to the vessel and the cargo by reason of his negligence. (Arts. 628 - 631)

Second Mate

FTakes command of the vessel in case of the inability or disqualification of the captain and the sailing mate, assuming insuch case their powers and responsibilities.

FThird in commandFDuties:

Preserve the hull and rigging of the vessel;Arrange well the cargo;Discipline the crew;Assign work to crew members;Inventory the rigging and equipment of the vessel, if laid up. (Art. 632)

Engineers

FOfficers of the vessel but have no authority except in matters referring to the motor apparatus. When two or more arehired, one of them shall be the chief engineer.

FDuties:In charge of the motor apparatus, spare parts, and other instruments pertaining to the engines;Keep the engines and boilers in good condition;Not to change or repair the engine without authority of the captain;Inform the captain of any damage to the motor apparatus;Keep an Engine Book;Supervise all personnel maintaining the engine. (Art. 632)

Crew

FThe aggregate of seamen who man a ship, or the ships company.

FHired 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 Contracts

By the voyage;By the month; and

3. By share of profits or freightage.

Just Causes for the Discharge of Seaman While Contract Subsists

Perpetration of a crime;Repeated insubordination, want of discipline;Repeated incapacity and negligence;Habitual drunkenness;Physical incapacity;Desertion. (Art. 637)

Rules in case of Death of a Seaman

FThe seamans heirs are entitled to payment as follows:If death is natural:compensation up to time of death if engaged on wageif by voyage - half of amount if death occurs on voyage out; and full, if on voyage inif by shares - none, if before departure; full, if after departureif death is due to defense of vessel - full payment;if captured in defense of vessel - full payment;if captured due to carelessness - wages up to the date of the capture. (Art. 645)

Complement of the Vessel

FAll persons on board, from the captain to the cabin boy, necessary for the management, maneuvers, and service, thusincluding the crew, the sailing mates, engineers, stokers and other employees on board not having specific designations.

FDoes not include the passengers or the persons whom the vessel is transporting.

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D. SUPERCARGOES

FPersons who discharges administrative duties assigned to him by ship agent or shippers, keeping an account and record oftransaction as required in the accounting book of the captain. (Art. 649)

E. PILOT

FA person duly qualified, and licensed, to conduct a vessel into or out of ports, or in certain waters.FThe 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.FMasterpro hac vicefor the time being in the command and navigation of the ship.FWhile in exercising his functions a pilot is in sole command of the ship and supersedes the master for the time being in thecommand and navigation of the ship, the master does not surrender his vessel to the pilot and the pilot is not the master. Thereare occasions when the master may and should interfere and even displace the pilot, as when the pilot is obviously incompetentor intoxicated (Far Eastern Shipping Company vs. CA).

?Compulsory Pilotage States possessing harbors have enacted laws or promulgated rules requiring vessels approachingtheir ports to take on board pilots licensed under the local laws. (Notes and Cases on the Law on Transportation and PublicUtilities, Aquino, T. & Hernando, R.P. 2004 ed. p. 518)

Liablity of Pilot

!GENERAL RULE: On compulsory pilotage grounds, the Harbor Pilot is responsible for damage to a vessel or to life orproperty due to his negligence.

!EXCEPT: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 PPA Admin Order 03-85)

SPECIAL CONTRACTS OF MARITIME COMMERCE

Charter partyBill of ladingContract of transportation of passengers on sea voyagesLoan on bottomryLoan on respondentiaMarine insurance

CHARTER PARTY

FA contract by virtue of which the owner or agent binds himself to transport merchandise or persons for a fixed price.FA contract by which an entire ship, or some principal part thereof is let/leased by the owner to another person for aspecified time or use. (Planters Products, Inc. vs. CA, 226 SCRA 476)

FParties:Ship owner or ship agentCharterer

FClasses:1. Bareboat or demise The charterer provides crew, food and fuel. The charterer is liable as if he were the owner, exceptwhen the cause arises from the unworthiness of the vessel. The shipowner leases to the charterer the whole vessel, transferringto the latter the entire command, possession and consequent control over the vessels navigation, including the master and thecrew, 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 thecharterer is treated as owner pro hac vice, the charterer assumes the customary rights and liabilities of the shipowner tothird 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 forothers.

?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.FKinds:Time charter vessel is chartered for a fixed period of time or duration ofvoyage.Voyage or trip charter the vessel is leased for one or series of voyagesusually for purposes of transporting goods for charterer.

LEASE CHARTER PARTY

If for a definite period, lesseecannot give up the lease bypaying a portion of theamount agreed upon.

Charterer may rescind charterparty by paying half of thefreightage agreed upon.

If the leased property is soldto one who knows of the

existence of the lease, the newowner must respect the lease.

The new owner is notcompelled to respect the

charter party so long as he canload the vessel with his own

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cargo. (Art. 689)

Civil law concept Commercial law concept

CHARTER PARTY

BILL OF LADING

An entire or completecontract.

More like a private receiptwhich the captain gives toaccredit goods received frompersons

Consensual contract Real contract

BAREBOAT OR DEMISECHARTER

CONTRACT OF

AFFREIGHTMENT (TIMEOR VOYAGE CHARTER)

Charterer becomes liable toothers caused by itsnegligence

Owner remains liable ascarrier and must answer forany breach of duty

Charterer regarded as ownerpro hac vice for the voyage

Charterer is not regarded asowner.

Owner of vessel relinquishespossession, command andnavigation to charterer

The vessel owner retainspossession, command andnavigation of the ship

Common carrier is convertedto private carrier.

Common carrier is notconverted to a private carrier.

PERSONS WHO MAY MAKE A CHARTEROwner or owners of the vessel, either in whole or in majority part, who have legal control and possession of thevessel

Charterer may subcharter entire vessel to 3rd

person only if not prohibited in original charter. (Art.679)Ship agent if authorized by the owner/s or given such power in the certificate of appointment. (Art.598)Captain in the absence of the ship agent or consignee and only if he acts in accordance with the instructions of theagent or owner and protects the latters interests. (Art.609)

REQUISITES OF A VALID CHARTER PARTY

Consent of the contracting partiesExisting vessel which should be placed at the disposition of the shipperFreightCompliance 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 partythat in case of a maritimeaccident for which theshipowner is not responsibleby law, contract or otherwise,the cargo shippers, consigneesor owners shall contributewith the shipowner in general

average. (Pandect ofCommercial Law andJurisprudence, Justice JoseVitug, 1997 ed.)

A clause in a charter partyproviding that the COGSAshall apply, even though thetransportation is domestic,subject to the extent that anyterm of the bill of lading isrepugnant to the COGSA orapplicable law, then to the

extent thereof the provision ofthe bill of lading is void.(Pandect of Commercial Lawand Jurisprudence, JusticeJose Vitug, 1997 ed.)

Rights and Obligations of Parties

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SHIPOWNER OR SHIP

AGENT

CHARTERER

If the vesselis charteredwholly, notto acceptcargo fromothers;To observerepresentedcapacity;To unloadcargo

clandestinelyplacedTo substituteanothervessel if loadis less than3/5 ofcapacity;To leave theport if thechartererdoes notbring thecargo withinthe lay daysand extra laydaysallowed;To place in avessel in acondition to

navigate;to bringcargo tonearestneutral portin case ofwar orblockade.(Arts. 669-678)

To pay theagreedcharter price;To payfreightage onunboardedcargo;To pay lossesto others forloadinguncontracted

cargo andillicit cargo;To wait if thevessel needsrepair;To payexpenses fordeviation.(Arts. 679-687)

Rescission of a Charter Party

At charterersrequest

(Art 688)

At shipownersrequest

(Art. 689)

Fortuitous causes(Art. 690)

1. By abandoning

the charter andpaying half of thefreightage;2. Error in tonnageor flag;3. Failure to placethe vessel at thecharterers disposal;4. Return of thevessel due topirates, enemies orbad weather;5. Arrival at a portfor repairs.

1. If the extra lay

days terminatewithout the cargobeing placedalongside thevessel;2. Sale by theowner of the vesselbefore loading bythe charterer;

1. War or

interdiction ofcommerce;2. Blockade;3. Prohibition toreceive cargo;4. Embargo; and5. Inability of thevessel to navigate.

Terms:Primage- bonus to be paid to the captain after the successful voyage.Demurrage the sum fixed in the charter party as a remuneration to the owner of the shipfor the detention of his vessel beyond the number of days allowed by the charter party forloading or unloading or for sailing.

Deadfreight the amount paid by or recoverable from a charterer of a ship for the portionof the ships capacity the latter contracted for but failed to occupy.Lay Days - days allowed to charter parties for loading and unloading the cargo.Extra Lay Days days which follow after the lay days have elapsed.

USUAL FORMS OF CONSUMMATING CONTRACTS

C.I.F. cost, insurance and freight;F.O.B. - free on board;F.A.S. - free alongside ship; andC. & F. - cost and freight.

TRANSSHIPMENT OF GOODS

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

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In case of loss of the vessel dueto a risk insured against, theobligation of the insurer becomesabsolute

In case of loss of thevessel due to a marineperil, the obligation ofthe borrower to pay isextinguished

Consensual contract Real contract

Hypothecary Nature of Bottomry/ Respondentia

!GENERAL RULE: The obligation of the borrower to pay the loan is extinguished if the goods given as security areabsolutely lost by reason of an accident of the sea, during the voyage designated, and if it is proven that the goods were onboard.

!EXCEPTIONS:Loss due to inherent defect;Loss due to the barratry on the part of the captain;Loss due to the fault or malice of the borrower;The vessel was engaged in contraband; andThe cargo loaded on the vessel be different in from that agreed upon.

Concurrence of Marine Insurance and Loan on Bottomry/Respondentia

The insurable interest of the owner of a ship hypothecated by bottomry is only the excess of the value over theamount secured by bottomry. (Sec. 101, Insurance Code)The value of what may be saved in case of shipwreck shall be divided between the lender and the insurer inproportion 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 naturelikewise of an insurance coverage to the extent of the loan accommodation. The same rule would apply to the hypothecation ofthe cargo by respondentia. (Pandect of Commercial Law and Jurisprudence, Justice Jose Vitug, 1997 ed.)

ACCIDENTS IN MARITIME COMMERCE

AveragesArrival Under StressCollisionShipwreck

AVERAGE

FAn extraordinary or accidental expense incurred during the voyage in order to preserve the cargo, vessel or both, and alldamages or deterioration suffered by the vessel from departure to the port of destination, and to the cargo from the port ofloading 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 thesituation constitutes general average.

FClasses:Particular or Simple AverageGross 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 constitutegeneral average. Not only is there absence of a marine peril, common safety factor, and deliberateness. It is the safety of theproperty, 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 ORSIMPLE

GROSS OR GENERAL

Definition

Damages or expenses causedto the vessel or cargo that didnot inure to the commonbenefit, and borne byrespective owners. (Art. 809)

Damages or expensesdeliberately caused in orderto save the vessel, its cargoor both from real and knownrisk. (Art. 811)

Requisites common danger;

deliberate sacrifice;success;proper formalities andlegal steps.

Liability

The owner of the goods whichgave rise to the expense orsuffered the damage shall bear

this average. (Art. 810)

All the persons having aninterest in the vessel and thecargo therein at the time of

the occurrence of theaverage shall contribute tosatisfy this average. (Art.812)

@ The insurers (Art.859)and lenders on bottomry andrespondentia shall likewisecontribute. (Art.732).

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Number of interests involved

Only one interest involved Several interests involved

Share in the damage or expense

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

Right to recover

No reimbursement There may be reimbursement

Kinds (not exclusive)

Art. 809 Art. 811

Procedure for recovery

Assembly anddeliberationResolution of the

captainEntry of the resolutionin the logbookDetailed minutesDelivery of the minutesto the maritime judicialauthority of the firstport, within 24 hoursfrom arrival,Ratification by captainunder oath. (Arts. 813-814)

GOODS NOT COVERED BY GENERAL AVERAGE EVEN IF SACRIFICED

Goods carried on deck. (ART.855)Goods not recorded in the books or records of the vessel. (ART.855 (2))Fuel for the vessel if there is more than sufficient fuel for the voyage. (Rule IX, York-Antwerp Rule)

JettisonFAct of throwing cargo overboard in order to l ighten the vessel.FOrder of goods to be cast overboard:

Those which are on the deck, preferring the heaviest one with the least utility and value;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 ofoccupation 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 boardshould 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 Cargo

Deck cargo is allowed only in domestic/coastwise/inter-island shipping, and is prohibited ininternational/overseas/foreign shipping.If deck cargo is loaded with the consent of the shipper on overseas trade, it must always contribute to generalaverage, but should the same be jettisoned, it would not be entitled to reimbursement because there is violation ofthe Y-A Rules.If deck cargo is loaded with the consent of the shipper on coastwise shipping, it must always contribute to generalaverage 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, thevessel is exposed for many days to perils of the sea.

DOMESTIC

INTERNATIONAL

Deck cargo is allowed Deck cargo is not allowed

With shippers consent

General average Particular average

Without shippers consent

Captain is liable Captain is liable

ARRIVAL UNDER STRESS (ARRIBADA)

FThe arrival of a vessel at the nearest and most convenient port instead of the port of destination, if during the voyage thevessel cannot continue the trip to the port of destination.

When lawful When unlawful Who bears

expenses:

The inability tocontinue voyage isdue to lack ofprovisions, well-founded fear ofseizure, privateers,pirates, or accidentsof the sea disablingit to navigate. (Art.

Lack ofprovisions dueto negligenceto carryaccording tousage andcustoms;Risk of enemynot well known

The shipowner orship agent is liablein case of unlawfularrival under stress.But they shall notbe liable for thedamages caused byreason of a lawfularrival. (Art. 821)

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One vessel at fault

FVessel at fault is liable for damage caused to innocent vessel as well as damages suffered by the owners of cargo of bothvessels. (Art. 826)

Both vessels at fault

FEach vessel must bear its own loss, but the shippers of both vessels may go against the shipowners who will be solidarilyliable. (Art. 827)

Vessel at fault not known

FEach vessel must bear its own loss, but the shippers of both vessels may go against the shipowners who will be solidarilyliable. (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 bothvessels.Third vessel at fault

FThe third vessel will be liable for losses and damages. (Art. 831)Fortuitous event/force majeure

FNo 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, ornavigational 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 selectionand supervision of employees is unavailing in case of a maritime tort resulting in collision. It is not a civil tort governed by theCivil 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.827of the Code of Commerce. (Notes and Cases on the Law on Transportation and Public Utilities, Aquino, T. & Hernando, R.P.2004 ed.)

MARITIME PROTEST

FCondition precedent or prerequisite to recovery of damages arising from collisions and other maritime accidents.FIt is a written statement made under oath by the captain of a vessel after the occurrence of an accident or disaster in whichthe vessel or cargo is lost or damaged, with respect to the circumstances attending such occurrence, for the purpose ofrecovering 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 beprotested. (Art. 836)

FCases applicable:Collision (Art. 835);Arrival under stress (Art. 612(8));Shipwrecks (Arts. 612(15), 843);Where the vessel has gone through a hurricane or when the captain believes that the cargohas suffered damages or averages (Art. 624).

FWho makes: CaptainFWhen made: within 24 hours from the time the collision took place.FBefore whom made: competent authority at the point of collision or at the first port of arrival, if in the Philippines and tothe Philippine consul, if the collision took place abroad. (Art. 835)

SHIPWRECK

FIt 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 indemnityfrom said captain. (Art. 841)

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

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SPECIAL CONCEPTS

ARRASTRE SERVICE

FA contract for the unloading of goods from a vessel.FApplicability:Overseastrade only. (Commercial Law Review, C. Villanueva, 2004 ed.)FSignificance: When a person brings in cargo from abroad, he cannot unload and deliver the cargo by himself. Theunloading must be done by the arrastre operator, which will then deliver the cargo to the importer. (Commercial Law Review,C. Villanueva, 2004 ed.)

FNature of business: It is a public utility, discharging functions which are heavily invested with public interest.FLiability:

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 thenegligence and while the goods are in the custody of the arrastre operator. (Hartford Fire Insurance v. E. Razon, Inc.)

STEVEDORING SERVICE

FThe carriage of goods from the warehouse or pier to the holds of the vessel. (Chief of Staff vs. CIR)FAs understood in the port business, the term consists of the handling of cargo from the hold of the ship to the dock, in caseof 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

FSystem whereby the shipper loads his cargoes in a specially designed container, seals the container and delivers it to thecarrier for transportation. The carrier does not participate in the counting of the merchandise for loading into the container, theactual 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 doneat pier-side. (Bankers vs. CA)

III. CARRIAGE OF GOODS BY SEA ACT/COGSA (C.A. No. 65)

APPLICABILITY

FThe transportation must be:Water/maritime transportation;for the carriage of goods; andoverseas/international/foreign (from foreign port to Philippine port).

?It can be applied in domestic sea transportation if agreed upon by the parties. (Clause paramountorparamount clause)

IMPORTANT FEATURES:

Amount of carriers liabilityNotice of damagePrescriptive period

AMOUNT OF CARRIERS LIABILITY

FUnder the Sec. 4(5), the liability limit is set at $500 per package or customary freight unit unless the nature and value ofsuch goods is declared by the shipper. This is deemed incorporated in the bill of lading even if not mentioned in it. (EasternShipping vs. IAC, 150 SCRA 463)

?Note that Art. 1749, NCC applies to domestic/inter-island/coastwise trade.

NOTICE OF DAMAGE (SEC. 3(6))

FRules:Patent damage: shipper should file a claim with the carrier immediately upon deliveryLatent 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

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FAction for loss or damage to the cargo should be brought within one year after:Delivery of the goods (delivered but damaged goods); orThe 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 shipperof the goods because the same had perished, gone out of commerce, or disappeared in such a way that their existence isunknown or they cannot be recovered. Thus, it is inapplicable in case of misdelivery or conversion. (Ang vs. AmericanSteamship Agencies Inc.) and damage arising from delay or late delivery (Mitsui O.S.K. Lines Ltd. vs. CA). In such instancethe, Civil Code rules on prescription shall apply.

?The one-year prescriptive period is suspended by:

The express agreement of the parties (Universal Shipping Lines, Inc. vs. IAC, 188SCRA 170)The filing of an action in court until it is dismissed. (Stevens & Co. vs. NordeutscherLloyd, 6 SCRA 180)

?The one-year period shall run from delivery of the last package and is not suspended by extrajudicial demand. (DolePhils.,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 tothe 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

FThe transportation must be:International transportation;Air transportation; andCarriage 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 thetransportation or transshipment, or2. Within the territory of a single High Contracting Party, if there is an agreed stopping place within a territory subject tothe sovereignty, mandate or authority of another power, even though that power is not a party to the Convention. (roundtrip, Am. Jur.)

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

WHEN INAPPLICABLE

When public policy is contradicted;

If the requirements under the Convention are not complied with.

IMPORTANT CONCEPTS:

1. Transportation documentsPassenger ticketBaggage checkAir way bill

2. Liability of the carrier for damagesDeath or injury to passengers

Loss or damage to baggage or goodsDelay

3. Successive carrier agreement4. Jurisdiction5. Combined transportation agreement

PASSENGER BAGGAGE AIR WAYBILL

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TICKET CHECK

Passenger Checked-inbaggage

Goods to beshipped

LIABILITY OF CARRIER FOR DAMAGES1. Death or injury of a passenger if the accident causing it took place on board the aircraft or in the course of its operations ofembarking or disembarking; (Art. 17)2. Destruction, loss or damage to any baggage or goods, if it took place during the transportation by air; (Art. 18) and

?Transportation by air The period during which the baggage or goods are in the charge of the carrier, whether in an airportor on board an aircraft, or, in case of a landing outside an airport, in any place whatsoever.

It includes any transportation by land or water outside an airport if such takes place in the performance of a contract fortransportation by air, for the purpose of loading, delivery, or transshipment.

3. Delay in the transportation of passengers, baggage or goods.(Art. 19)

Note: The Hague Protocol amended the WC by removing the provision that if the airline took all necessary steps to avoid thedamage, it could exculpate itself completely (Art. 20(1)). (Alitalia vs. IAC, 192 SCRA 9)

LIMIT OF LIABILITY (Art. 22, as amended by Guatemala Protocol, 1971; Alitalia vs. IAC)

1. Passengers

!GENERAL RULE:$100,000 per passenger

!EXCEPTION:Agreement to a higher limit

2. Checked-in baggage

!GENERAL RULE:$20 per kilogram

!EXCEPTION:In case of special declaration of value and payment of a supplementary sum by consignor, carrier is liable tonot more than the declared sum unless it proves the sum is greater than actual value.3. Hand-carried baggage

F$1000/passenger4. Goods to be shipped

!GENERAL RULE:$20 per kilogram

!EXCEPTION:In case of special declaration of value and payment of a supplementary sum by consignor, carrier is liable tonot more than the declared sum unless it proves the sum is greater than actual value.

?An agreement relieving the carrier from liability or fixing a lower limit is null and void. (Art. 23)

?Carrier is not entitled to the foregoing limit if the damage is caused by willful misconduct or default on its part. (Art. 25)

?Thus, the WC does not operate as an exclusive enumeration of the instances of an absolute limit of the extent of liability. Itdoes not preclude the application of the Civil Code and other pertinent local laws. It does not regulate or exclude liability forother breaches of contract by the carrier, or misconduct of its employees, or for some particular or exceptional type of damage.(Alitalia vs. CA)

@In PanAm v. IAC, the WC was applied as regards the limitation on the carriers liability, there being a simple loss ofbaggage without any improper conduct on the part of the officials or employees of the airline or other special injury sustainedby the passenger.

?In KLM Royal v. Tuller, the WC has invariably been held inapplicable, or as not restrictive of the carriers liability, where

there was satisfactory evidence of malice or bad faith attributable to its officers and employees. (Alitalia vs. IAC)

ACTION FOR DAMAGES1. Notice of claim

FA written complaint must me made within:3 days from receipt of baggage7 days from receipt of goodsIn case of delay, 14 days from receipt of baggage/goods

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?The complaint is a condition precedent. Without the complaint, the action is barred except in case of fraud on the part of thecarrier. (Art. 26)

2. Prescriptive period

FAction must be filed within 2 years from:date of arrival at the destinationdate of expected arrivaldate on which the transportation stopped. (Art. 29)

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

RULE IN CASE OF VARIOUS SUCCESSIVE CARRIERS

Carriage of passengers

!GENERAL RULE:Action is filed only against the carrier in which the accident or delay occurred.

!EXCEPTION:Agreement or contract whereby the first carrier assumed liability for the whole journey.Carriage of baggage or goods

Passenger or consignor can file an action against the firstcarrier and the carrier in which the damage occurredPassenger or consignee can file an action against the lastcarrier and the carrier in which the damage occurred.

?These carriers are jointly and severally liable. (Art. 30)

? A contract of international carriage by air, although performed by different carriers under a series of airline ticketsconstitutes a single operation. Members of the International Air Transportation Association (IATA) are under a general pool

partnership agreement wherein they act as agent of each other in the issuance of tickets to contracted passengers to boost ticketsales worldwide and at the same time provide passengers easy access to airlines which are otherwise inaccessible in some partsof the world. (American Airlines vs. CA)

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

JURISDICTION

FAt the option of the plaintiff, the action for damages may be filed in the:Court of domicile of the carrier;Court of its principal place of business;Court where it has a place of business through which the contract has been made; orCourt of the place of destination. (Art. 28(1))

NOTE:It is the passengers ultimate destination not an agreed stopping place that determines the country where suit is tobe filed.

?The forum of action provided in Art. 28(1) is a matter of jurisdiction rather than of venue. (Santos III vs. Northwest; 2AC.J.S.)

V. SALVAGE LAW (Act No. 2616)

SALVAGE

FTwo concepts:

1. Services one person renders to the owner of a ship or goods, by his own labor, preserving the goods or the shipwhich the owner or those entrusted with the care of them have either abandoned in distress at sea, or are unable to protect orsecure.

2. Compensation allowed to persons by whose voluntary assistance a ship at sea or her cargo or both have been savedin whole or in part from impending sea peril, or such property recovered from actual peril or loss, as in cases of shipwreck,derelict or recapture.

FRequisites:Valid object of salvage;Object must have been exposed to marine peril (not perils of the ship);Services rendered voluntarily (neither an existing duty nor out of a pre-existing contract);

Services are successful, total or partial.

FSubjects of Salvage:1. Ship itself;2. Jetsam goods which are cast into the sea, and there sink and remain under water;3. Floatsam or Flotsam goods which float upon the sea when cast overboard;4. Ligan or Lagan goods cast into the sea tied to a buoy, so that they may be found again by the owners (p.173, Judge Diaz).

FPersons who have no right to a reward for salvage:1. Crew of the vessel saved;2. Person who commenced Salvage in spite of opposition of the Captain or his representative;

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3. In accordance with Sec. 3 of the Salvage Law, a person who fails to deliver a salvaged vessel or cargo to the Collector ofCustoms.

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

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

?If it is clear that the intention to return is slight, the salvage which was done thereafter is considered valid. (Notes and Caseson the Law on Transportation and Public Utilities, Aquino, T. & Hernando, R.P. 2004 ed. p. 616)

CONTRACT OF TOWAGE

FA contract whereby one vessel, usually motorized, pulls another, whether loaded or not with merchandise, from one placeto another, for a compensation. It is a contract for services rather than a contract of carriage.

SALVAGE

TOWAGE

Governed by special law(Act No. 2616)

Governed by Civil Code oncontract of lease

Requires success, otherwiseno payment

Success is not required

Must be done with theconsent of thecaptain/crewmen

Only the consent of thetugboat owner is needed

Vessel must be involved inan accident

Vessel need not be involvedin an accident

Fees distributed amongcrewmen

Fees belong to the tugboatowner

RULES ON SALVAGE REWARD

The reward is fixed by the RTC judge in the absence of agreement or where thelatter is excessive. (Sec. 9)The reward should constitute a sufficient compensation for the outlay and effortof the salvors and should be liberal enough to offer an inducement to others torender services in similar emergencies in the future.If sold (no claim being made within 3 months from publication), the proceeds,after deducting expenses and the salvage claim, shall go to the owner; if the latterdoes not claim it within 3 years, 50% of the said proceeds shall go to the salvors,who shall divide it equitably, and the other half to the government. (Secs. 11-12)If a vessel is the salvor, the reward shall be distributed as follows:

50% to the shipowner;25% to the captain; and

25% to the officers and crew in proportion to their salaries. (Sec. 13)

?Taking passengers from a sinking ship, without rendering any service in rescuing the vessel, is not a salvage service, beinga duty of humanity and not for reward.

VI. PUBLIC SERVICE ACT

(C.A. No. 146)

PURPOSES:

To secure adequate, sustained service for the public at the least possible cost;

To protect the public against unreasonable charges and poor, inefficient service;To protect and secure investments in public services;To prevent ruinous competition.

AUTHORITY TO OPERATE PUBLIC SERVICES

!GENERAL RULE:No public service shall operate without having been issued a certificate of public convenience or acertificate of public convenience and necessity.

!EXCEPTIONS:Warehouses;Animal drawn vehicles and bancas moved by oar or sail;

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Airships, except for the fixing of maximum rates for fare and freight;Radio companies, except for rates fixing;Public services owned or operated by the government, except as to rates fixing;Ice plants; andPublic markets.

PUBLIC SERVICE

FA person who owns, operates, manages or controls in the Philippines for hire or compensation, with general or limitedclientele, whether permanent, occasional or accidental, and done for general business purposes, any common carrier or publicutility, ice plants, power and water supplies, communication and similar public services. (Sec. 13b, CA 146)

?A casual or incidental service devoid of public character and interest is not brought within the category. The question

depends on such factors as the extent of services, whether such person or company has held himself or itself out as ready toserve the public or a portion of the public generally. (Luzon Stevedoring vs. PSC)

NOTE:The Public Service Commission created under the Public Service Law has already been abolished under P.D. No. 1and other issuances. It has been replaced by the following government agencies: LTO; LTFRB; ATO; BOE; NTC; NEA; ERB;NWRC; CAB; and MIA.

CERTIFICATE OFPUBLIC CONVENIENCE

(CPC)

CERTIFICATE OFPUBLIC CONVENIENCEAND NECESSITY(CPCN)

An authorization issued bythe appropriate governmentagency for the operation ofpublic services for which no

franchise, either municipalor legislative, is required bylaw, e.g., common carriers.

An authorization issued bythe appropriate governmentagency for the operation ofpublic service for which a

prior franchise is required bylaw; e.g. telephone and otherservices.

?A CPC or a CPCN constitutes neither a franchise nor a contract, confers no property right, and is a mere license or aprivilege. The holder of said certificate does not acquire a property right in the route covered thereby. Nor does it confer uponthe holder any proprietary right or interest or franchise in the public highways. Revocation of this certificate deprives him ofno vested right. New and additional burdens, alteration of the certificate, or even revocation or annulment thereof is reserved tothe State. (Luque vs. Villegas, 30 SCRA 408)

?It is a property and has a considerable value and can be the subject of sale or attachment. (Cogeo-Cubao Operators and

Drivers Assn. vs. CA, 207 SCRA 343, Raymundo vs. Luneta Motor Co.)

REQUREMENTS FOR GRANTING CPC OR CPCN

Applicant must be a citizen of the Philippines or a corporation or entity 60% of the capital of which is owned by suchcitizens;Applicant must prove public necessity;Applicant must prove that the operation of the public service proposed and the authorization to do business will promotethe public interest on a proper and suitable manner;Applicant must have sufficient financial capability to undertake the proposed services and meeting the responsibilitiesincident to its operation.

POWERS REQUIRINGPRIOR NOTICE AND

HEARING

POWERSEXERCISABLE

WITHOUT PRIORNOTICE AND HEARING

Issuance of CPC orCPCN;Fixing of rates, tolls,and charges;Setting up ofstandards andclassifications;Establishment of rulesto secure accuracy ofall meters and allmeasuring appliances;Issuance of ordersrequiringestablishment ormaintenance ofextension of facilities;

Investigation anymatter concerningpublic service;Requiring operators tofurnish safe, adequate,and proper service;Requiring publicservices to payexpenses ofinvestigation;Valuation of propertiesof public utilities;Examination and testof measuringappliances;Grant of special

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Revocation, ormodification of CPCor CPCN;

7. Suspension of CPC orCPCN, except when it isnecessary to avoid seriousand irreparable damage orinconvenience to the publicor private interest, in whichcase, a suspension not morethan 30 days may beordered, prior to thehearing. (Soriano v.Medina, 164 SCRA 36)

permits to make extraor special trips interritories specified inthe certificate;Uniform accountingsystem and furnishingof ann

Documents

Transpo Q&A