Loan on Bottomrythe owner of a ship borrows for the use, equipment or repair of

the vessel for a definite term, and pledges the ship as security, if the ship is lost during the voyage

or during the limited time on account of the perils enumerated, the lender shall lose his money.

Loan on Respondentia loan of money on maritime interest;on goods laden on board of a ship;Such goods must be sold or exchanged during

the course of the voyage;if the goods should be lost in the course of the

voyage, by any of the perils enumerated in the contract, the lender shall lose his money;

if not that the borrower shall pay him the sum borrowed , with the interest agreed upon.

Characteristics :In respondentia, the goods are hypothecated as security for a loan; the repayment is dependent on maritime risks;

Usually in the form of a bond;Borrower’s (owner of the goods) personal responsibility is the principal security.

Repayment must be based on a maritime risk;No bottomry or respondentia if there is no maritime

risk involved as to the loss of the goods;Loss of the goods due to maritime risk will result to

the lender losing the money lent; Where the ship is lost but the goods survive, the

lender on respondentia shall be entitled to repayment;Where both the ship and goods are lost, the lender

shall lose the money lent.Where there is repayment, lender is entitled to

receive greater return than what an ordinary lender would receive.

Bottomry or respondentia

Simple loan

the rate of interest is not subject to the usury law on account of the extraordinary risks involved

the rate of interest must not exceed the ceiling fixed by the usury law

there must necessarily be a marine risk the existence of which must be duly established

there need not be such risks involved

must be executed in accordance with form and manner required in the code of commerce

the formal requisites regarding contracts in general would apply.

must be recorded in the registry of vessels in order to bind third persons

no such registration is required

preference is extended to the last lender if there be several lenders, on the theory that were it not for the last lender , then the prior lenders would not have benefited from the preservation of the security .

the first lender a s a general rule enjoys preference over subsequent ones. 

Forms of Loan on Bottomry or RespondentiaPublic instrument .Policy signed by the contracting parties and the broker taking part therein.

Private instrument.

To affect Third Person:

Shall be entered in the certificate of the registry of the vessel.

Shall be recorded in the registry of vessel.

Additional requisites:

Must conform to the registry of the broker who took part therein in case of number 2 above

Acknowledgement of the signature in case of number 3 above.

Must be recorded in the registry of vessels of the port of registry of the vessel within 8 days upon its arrival in case of contracts executed during the voyage.

Required Contents of Loan on bottomry or respondentiaThe following must be stated:

The kind, name and registry of the vessels The name ,surname and domicile of the captain The names , surnames and domiciles of the person

giving and the person receiving the loan.The amount of the loan abd the premium

stipulated .The time for payment.The goods pledged to secure repayment The voyage during which the risk is run.

Transferability of the contract Requisites:The contract must be made to orderIndorsement is necessary Effects: Indorsee acquire all the rights as well as the

corresponding obligations of the indorser.

Principal of Loan Determine by fixing the value of good or in

merchandise.

In case the principal is larger than the object of bottomry loan:

the loan shall be valid only for the amount of object appraised by the experts

The surplus principal shall be returned with legal interest for the entire time required for payment.

If the full amount not used for cargo or the goods were not loaded:

The balance shall be returned before clearing.

Duration of the risk assume by the lender?The period stated on the contractIf no contract: On Vessel - From the moment the vessel

puts to sea until the drops of its anchor in the port of the destination.

On Cargo – From the time they are loaded at the shore or wharf of the port of shipment unitl they are unloaded in the port of consignment.

The loans may be constituted jointly or separately:

On the hull of the vessel On the rigging On the equipment, provisions and fuelOn the engine , if the vessel is a steamer On the merchandise loaded.

If the loan constituted based on 1 to 4 as enumerated above:

Freightage earned during the voyage shall also be considered as liability for the loan.

If the loan is made on the cargo For the whole cargo All must be liable for the loan For particular object of the vessel or cargo

Only the object concretely and specifically mentioned shall be liable.

Authority to constitute loan on Bottomry The shipowner If part owner – he may contract shall be limited only to the

extent of his interest.Shipcaptain If part owner - – he may contract shall be limited only

to the extent of his interest. If Not part owner – he cannot constitute loan except

when, on account of extreme necessity.

Note: No Loans on bottomry may be made on the salaries of the crew or on the profits.

Authority to constitute loan on respondentia

Only the Cargo owner

Effects if Shipcaptain entered a contract of respondentia:

Loan is void The principal,interest and the cost are

chargeable to his private account.May discharge by the shipowner.

Absolute loss of the goods

Requisites to extinguish liability:

If the loss arose from an accident of the sea at the time and during the voyage designated in the contract.

If it is proven that the cargo was on board

Exceptions:

If the loss was caused by the inherent defect of the thing

through the fault or malice of the borrower.Barratry on the part of the captainIf the damages is the consequence of being

engaged in contraband.If it arose it arose from having loaded the

merchandise on a vessel different from that designated in the contract unless change made by reason of force majeure.

Who suffered loss of the goods?

Both Loan on bottomry and respondentia

Lenders shall suffer in proportion to their respective interest.

In case of shipwreck On cargo or goods the proceed from salvage value of the

goods shall be apply first to the loan.

On vessel or any of its parts The freightage earned during the

voyage shall be liable for payment of loan.

If the vessel or cargo is the object of a loan on Bottomry or respondentia and marine insurance:

The salvage value of the vessel or goods shall be divide between the lender in proportion to their legitimate interest.

Delay in repayment On principal of the loan It bears legal interest On premiums It bears no legal interest