starr transpo reviewer ampil 1

- � -1 PART I – COMMON CARRIERS

Transportation – Contract whereby one obligates itself/themselves/himself to transport persons, things, or news from one place to another for a fixed price. Kinds: According to object

1. Transportation of things 2. Transportation of persons 3. Transportation of news

According to place of travel 1. Land 2. Water

a) Navigable canals b) Lakes or rivers c) By sea

3. Air A contract of transportation by air may be regarded as commercial. (PAL v. Mendoza) Things to consider when faced with a situation:

1. Determine whether the carrier is common or private - if common, law on common carriers apply - if private general law on contracts and obligations

2. Determine whether it involves carriage of goods or passengers - If carriage of goods Arts. 1734 to 1754 apply - If passengers, Arts. 1755 to 1763.

Parties to the Contracts: Dependent on the kind of transportation Generally it involves:

1. The shipper 2. The carrier or conductor

For transportation of passengers 1. The shipper, who is also the person transported 2. The carrier

For transportation of things: 1. The shipper 2. The carrier 3. The consignee

For transportation of news: 1. The remitter 2. The carrier 3. The consignee

Definitions Shipper/Consignor – One who gives rise to the contract of transportation by agreeing to deliver the things or new , or to present his own person ir those of another/other in the case of transportation of passengers. Carrier/Conductor – One who binds himself to transport persons, things or news as the case may be, or one employed in or engaged in the business of carrying goods for others for hire. May be classified into:

1. Common 2. Private

Consignee – The party to whom the carrier is to deliver the things being transported, or one to whom the carrier may lawfully make delivery in accordance with the contract of carriage. Shipper and consignee may be the same person. Freight – It has various definitions:

1. The price or compensation paid for the transportation of goods by a carrier, at sea, from port to port.

2. May also denote the hire paid for the carriage of goods on land from place to place or on inland streams or lakes.

3. The goods or merchandise transported at sea, on land on inland streams or lakes.

The term is used in 2 senses: a. To designate the price for the carriage, known as freightage b. To designate the goods carried.

A contract of carriage is not affected, changed or altered by the mere fact that the obligor avails of other parties to effect the transportation agreed upon, as in the case of transportation of agents.

SUBSECTION 1. - General Provisions Art. 1732. Common carriers are 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. Common carriers: One that holds itself out as ready to engage in the transportation of goods for hire as a public employment and not as a casual occupation. They are thus:

1. Persons, corporations, firms or associations 2. Engaged in the business of carrying or transporting

passengers or goods or both 3. By land, water, or air 4. For compensation 5. Offering their services to the public.

Private carrier – Those who transport or undertake to transport in a particular instance for hire or reward. A common carrier undertaking to carry a special cargo or chartered to a special person only becomes a private carrier. (Home Insurance v. American Steamship) The general public enters into a contract of transportation without a hand in the preparation thereof. Hence, the law on common carriers extends its protective mantle against one-sided stipulations over which the riding public has no understanding, or worse, choice. This not so in case of private carriers, where both parties can freely enter and agree on stipulations, usually with a consideration therefore. (Valenzuela Hardwood v. CA) Distinguishing common carriers from private carriers:

Private Carrier Common Carrier

Agrees in some special case with some private individual to carry for hire. Not bound to carry for any reason, unless it enters into a special agreement to do so. Does not hold itself out as engaged in the business for the public and is therefore not subject to regulation as a common carrier. No presumption of negligence for injuries or loss. Only requi red to exerc ise ordinary diligence. Governed by law on obligations and contracts.

Holds himself out in common, that is, to all persons who choose to employ him, as ready to carry for hire. Bound to carry for all who offer such goods as it is accustomed to carry and tender reasonable compensation for carrying them. A public service and is thus subject to regulation. Presumed negligent for injuries or loss. R e q u i r e d t o e x e r c i s e ex t raord inary d i l i gence in t r a n s p o r t i n g g o o d s a n d passengers. Governed by law on common carriers.

Starr Weigand 2012 Transportation Law|Ampil

- � -2 In private carriers, the stringent provisions of the Civil Code on common carriers do not apply thus allowing for stipulations that lessen or remove the protection given by law in contracts involving common carriers. (National Steel Corporation v. CA) A trucking company which is an exclusive contractor and hauler of another company rendering or offering its services to no other individual or entity, cannot be considered a common carrier. (FGU Insurance v. GP Sarmiento) Test for common carrier: (FPIC v. CA)

1. Must be engaged in the business of carrying goods for others as a public employment, and must hold himself out as ready to engage in the transportation of goods for persons, generally as a business, and not as a casual occupation.

2. Must undertake to carry goods of the kind to which his business is confined.

3. Must undertake to carry by methods by which his business is conducted, and over his established roads.

4. The transportation must be for hire. True test: Whether the given undertaking is a part of the business engaged in by the carrier which he has held out to he general public as his occupation rather than the quantity of extent of the conveyances used in the employment. Determined by the character of the business carried on by the carrier. The test to determine a common carrier is whether the given undertaking is a part of the business engaged in by the carrier which he has held out to the general public as his occupation rather than the quantity or extent of the business transacted. (Bascos v Arada) The definition of common carriers in the Code 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 of the passengers or goods should by motor vehicle. (FPIC v. CA) It is not necessary that a carrier be issued a certificate of public convenience, and this public character is not altered by the fact that the carriage of the goods in question was periodic, occasional, episodic or unscheduled. (Loadstar Shipping v. CA) Characteristics of common carriers:

1. Undertakes to carry for all people indifferently; he is regarded in some respects, as a public servant.

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

3. No monopoly is favored. 4. Public convenience.

Public use – Use by the public, not confined to privileged individuals, but is open to the indefinite public. It is this quality which gives it a public character. (Common carriers are prohibited from exercising unreasonable discrimination.) The concept of “common carrier” under Art. 1732 may be seen to coincide neatly with the notion of “public service,” under the Public Service Act. “Public service” includes … every person that now or hereafter may own, operate, manage, or control in the Philippines, for hire or compensation, with general or limited clientele, whether permanent, occasional or accidental, and done for general business purposes, any common carrier… (Calvo v. UCPB General Insurance) Common carriers are not obligated by law to carry and to deliver merchandise, and persons are not vested with the right to prompt delivery unless such common carriers previously assume the obligation. Said rights and obligations are created by a specific contract entered into by the parties. (PAL v. Mendoza) Art. 1733. Common carriers, from the nature of their business and for reasons of public policy, are bound to observe extraordinary diligence in the vigilance over the goods and for the safety of the

passengers transported by them, according to all the circumstances of each case. Such extraordinary diligence in the vigilance over the goods is further expressed in Articles 1734, 1735, and 1745, Nos. 5, 6, and 7, while the extraordinary diligence for the safety of the passengers is further set forth in Articles 1755 and 1756. Extraordinary diligence: It is not enough that common carriers exercise ordinary diligence of a good father of a family. It must be extraordinary diligence. Reason for requiring extraordinary diligence: The nature of the business and the exigencies of public policy demand that they observe such diligence. Such is impressed with a special public duty, subject to the control and regulation of the state (through the Pubic Service Commission). The public relies on the care and skill of common carriers, and are forced to trust the utmost diligence and foresight of common carriers. (Code Commission) Common carriers, by the nature of their business, and by reason of public policy, are bound to observe extra-ordinary diligence in the vigilance over the goods and the safety of the passengers being transported by them. (Benedicto v. IAC) Who are liable for the failure to exercise such extraordinary diligence:

- The law requires the approval of the Public Service Commission in order that a franchise or any privilege pertaining thereto may be sold or leased without infringing the certificate issue to the grantee; and that if property covered by the franchise is transferred or leased without this requisite approval, the transfer is not binding against the public or the Service Commission; and in contemplation of law, the grantee of record continues to be responsible under the franchise in relation to the Commission and to the public. (Medina v. Cresencia)

- - The prevailing rule on common carriers makes the registered owner thereof liable for all consequences arising from the operations of the carrier. The public has the right to assume that the registered owner is the actual owner thereof. Otherwise they would be put in a disadvantage if they have to prove first the real owner before they can recover damages. (Benedicto v. IAC)

- Regardless of who the actual owner of a motor vehicle might be, the registered owner is the operator of the same with respect to the public and third persons, and as such, directly and primarily responsible for the consequences of its operation. (First Malayan Leasing and Finance Corporation v. CA)

- The registered owner of a certificate of public convenience is liable to the public for the injuries or damages suffered by passengers or third persons caused by the operation of said vehicle even though the same had been transferred to a third person. The registered owner of any vehicle even if not use for a public service should be responsible to the public or to third persons for injuries caused the latter while the vehicle is being driven on the highways or streets. A registered owner who has already sold or transferred a vehicle has the recourse to a third party complaint in the same action against brought against him to recover for the damage or injury done against the vendee or transferee of the vehicle. (BA Finance Corp. v. CA)

- A certificate of public convenience is not a requisite for the incurring of liability under the Civil Code provisions governing common carriers. That liability arises the moment a person or firm acts as a common carrier, without regard to whether or not such carrier has also complied with the requirements of the applicable regulatory statute and implementing regulations and has


- � -3been granted a certificate of public convenience or other franchise. (De Guzman v. CA)

Extraordinary diligence is not applicable to private carriers. They are only required to exercise ordinary diligence. Even common carriers are not made absolute insurers against all risks of travel and of transport of goods, and are not held liable for acts or events which cannot be foreseen or are inevitable, provided that they shall have complied with the rigorous standard of extraordinary diligence. (De Guzman v. CA)

SUBSECTION 2. - Vigilance Over Goods Art. 1734. Common carriers are responsible for the loss, destruction, or deterioration of the goods, unless the same is due to any of the following causes only: (1) Flood, storm, earthquake, lightning, or other natural disaster or calamity; (2) Act of the public enemy in war, whether international or civil; (3) Act of omission of the shipper or owner of the goods; (4) The character of the goods or defects in the packing or in the containers; (5) Order or act of competent public authority. These are usually Complete Defenses. (But the SC often confuses itself) Art. 1735. In all cases other than those mentioned in Nos. 1, 2, 3, 4, and 5 of the preceding article, if the goods are lost, destroyed or deteriorated, common carriers are presumed to have been at fault or to have acted negligently, unless they prove that they observed extraordinary diligence as required in Article 1733. Responsibility of common carriers: They are responsible for the loss, destruction and deterioration of the goods carried by them. Such arises from contract, as the relation of carriers with their patrons is contractual in nature. Breach of contract of carriage: Culpa contractual not culpa acquiliana. Because of the extraordinary diligence required of common carriers, they are given wide discretion in the selection and supervision of persons to handle goods. But, due diligence in selection and supervision may not exempt a common carrier for breach of contract of carriage for failure to exercise the extraordinary diligence required of it. A common carrier, both from the nature of its business and for insistent reasons of public policy is burdened by law with the duty of exercising extraordinary diligence not only in ensuring the safety of passengers by in caring for the goods transported by it. The loss or destruction or deterioration of good turned over to the common carrier for the conveyance to a designated destination raises instantly a presumption of fault or negligence on the part of the carrier, save only where such loss, destruction or damage arises from extreme circumstances such as a natural disaster or calamity. In order that that the common carrier may be exempted from liability, the natural disaster must have been the proximate and only cause of the loss. However, the common carrier must exercise due diligence to prevent or minimize the loss before, during, and after the occurrence of the natural disaster in order to be exempted from liability. (Arada v. CA) Presumption of negligence If the goods are proved to have been lost, destroyed or deteriorated, the common carrier is presumed to have been at fault or to have acted negligently, unless they prove that they have observed the extraordinary diligence required by law. Burden of plaintiff: Prove that the foods transported have been lost, destroyed or deteriorated. Thereafter burden is shifted to carrier.

Burden of carrier: Prove that he exercised extraordinary diligence required by law. When a carrier fails to establish any caso fortuito, the presumption by law of fault or negligence on the part of the carrier applies. (Eastern Shipping Lines v. CA) From the nature of their business and for reasons of public policy, common carriers are bound to observe extraordinary diligence in the vigilance over the goods and for the safety of passengers transported by them, according to all the circumstance of each case. In the event of loss, destruction or deterioration of the insured goods, common carriers shall be responsible unless the same is brought about, among others, by flood, storm, earthquake, lightning or other natural disaster or calamity. In all other cases, if the goods are lost, destroyed or deteriorated, common carriers are presumed to have been at fault or to have acted negligently, unless they prove that they observed extraordinary diligence. (Delsan transport Lines v. CA) There is no occasion for the necessity of discussing the diligence required of a carrier or of the theory of prima facie liability of the carrier, for from all indications, when the shipment did not suffer loss or damage while it was under the care of the carrier, or of the arrastre operator, it must be added. (Bankers v. CA) Where the common carrier accepted its passenger’s baggage for transportation and even had it placed in the vehicle by its own employee, it is responsible for the consequent loss of the baggage. (Sarkies Tours Phil. v. CA) Defenses of common carriers: (Closed list) (1) Flood, storm, earthquake, lightning, or other natural disaster or calamity; Requisites:

a) It must be the proximate and only cause. b) Common carrier must exercise due diligence to minimize or prevent the loss before, during and after the occurrence.

Effect of delay: natural disaster will not exempt carrier from responsibility, if there was no negligence on the part of the shipper. Accident due to defects of carrier is no caso fortuito so as to exempt him from liability. (2) Act of the public enemy in war, whether international or civil; Requisites: a) Act of public enemy must be the proximate and only cause. b) Common carrier exercised due diligence in preventing or minimizing the loss, before during and after the act. (3) Act of omission of the shipper or owner of the goods; Requisites: a) Proximate cause. If only contributory, carrier still liable if it was due to his negligence, but damages equitably reduced. b) Common carrier to exercise due diligence to prevent or minimize loss. (4) The character of the goods or defects in the packing or in the containers; As long as the damage is due to the inherent nature or defect of the goods or the containers thereof, the carrier cannot be held responsible. BUT, Common carrier must exercise due diligence to prevent or minimize loss. If the fact of improper packing is known to the carrier or his servants, or apparent upon ordinary observation, but it accepts the goods notwithstanding such condition, it is not relieved of liability for loss or injury resulting therefrom. (Southern Lines v. CA) (5) Order or act of competent public authority. To exempt common carrier from liability, public authority must have power to issue to the order. If it was issue without legal process, common carrier will be held liable.


- � -4 Defenses do not cover hijacking, unless attended by grave and irresistible threat, violence or force. (De Guzman v CA) Elements of force majeure: (Philippine American General Insurance Co., Inc. v. MGG Marine Services, Inc.) a) the cause of the unforeseen and unexpected occurrence, or the failure of the debtor to comply with his obligations, must be independent of human will; b) it must be impossible to foresee the event which constitutes the caso fortuito, or if it can be seen, it must be impossible to avoid; c) the occurrence must be such as to render it impossible for the debtor to fulfill his obligation in a normal manner; and d) the obligor must be free from any participation in the aggravation of the injury resulting to the creditor. To exempt a common carrier from liability for death or physical injuries to passengers upon the ground of force majeure, the carrier must clearly show not only that the efficient cause of the casualty was entirely independent of the human will, but also that it was impossible to avoid. Any participation by the common carrier in the occurrence of the injury will defeat the defense of force majeure. (Gatchalian v. Delim) May the shipper hold the employee of the common carrier liable? No. The action is based on a contract which binds only the parties to it, and the employee is not such party. thus, no action may be had against the latter. Art. 1736. The extraordinary responsibility of the common carrier lasts from the time the goods are unconditionally placed in the possession of, and received by the carrier for transportation until the same are delivered, actually or constructively, by the carrier to the consignee, or to the person who has a right to receive them, without prejudice to the provisions of Article 1738. When carrier’s responsibility begins: From the time the goods are delivered to the carrier, with the goods being placed unconditionally in the possession of the carrier, and the carrier is to receive them. By the act of delivery to the common carrier and upon receipt of the goods for transportation, the contract of carriage was deemed perfected. Pursuant to Art. 1736 of the Code, the extraordinary diligence of the common carrier would cease only upon delivery, actual or constructive, by the carrier to the consignee, or to the person who has the right to receive them. (Ganzon v. CA) The liability of the carrier as common carrier begins with the actual delivery of the goods for transportation, and not merely with the formal execution of a receipt or bill of lading; the issuance of a bill of lading is not necessary to complete delivery and acceptance. Even where it is provided by statute that liability commences with the issuance of the bill of lading, actual delivery and acceptance are sufficient to bind the carrier. (Compania Maritima v. Insurance Company) When carrier’s responsibility terminates: At the time the goods are delivered to the consignee or the person who has a right to receive the goods. Delivery need not be actual, and may be constructive. The duty of common carriers to exercise extraordinary diligence over the goods begins from the time they are placed unconditionally upon the hands of the carrier and lasts until its delivery, whether actual or constructive. (Servando v. Philippine Steam) Cargoes while being unloaded generally remain under the custody of the carrier. (Regional Container v. Netherlands Insurance) Constructive delivery: Notice of arrival of goods necessary When notice is sent by the carrier to the consignee or person who has a right to receive the goods, it is placed in the latter’s disposal, and thus automatically releases the carrier of the extraordinary responsibility over the goods.

Actual delivery, where the loss of the goods did not hold the carrier liable inasmuch as an agent who carries out the orders and instructions of the principal without being guilty of negligence, deceit or fraud, cannot be responsible for the failure of the principal to accomplish the object of the agency. (Samar Mining Co., Inc. v. Nordeutscher Lloyd) While delivery of the cargo to the customs authorities is not delivery to the consignee, or “to the person who has a right to receive them”, contemplated in Art. 1736 of the NCC, because in such case the goods are still in the hands of the Government and the owner cannot exercise dominion over them, however the parties may agree to limit the liability of the carrier considering that the goods have still to go through the inspection of the customs authorities before they are actually turned over to the consignee. This is a situation where the carrier loses control of the goods because of a custom regulation and loses control of the goods because of a custom regulation and it is unfair that it be made responsible for any loss or damage that may be caused to the goods arising during the interregnum. (Lu Do v. Binamira) "The extraordinary responsibility of the common carrier lasts from the time the goods are unconditionally placed in the possession of, and received by the carrier for transportation until the same are delivered, actually or constructively, by the carrier to the consignee, or to the person who has a right to receive them, without prejudice to the provisions of Article 1738." (Eastern Shipping v. CA) The extraordinary responsibility of common carriers lasts until actual or constructive delivery of the cargoes to the consignee or to the person who has a right to receive them. So delivery need not always be to consignee, but may be made to a “person who has a right to receive” the goods. (Macam v. CA) Shipper bound to observe all diligence in obtaining delivery of goods. A stipulation in the contract of shipment requiring the owner of the goods to present a notice of his claim within a specified time after the goods have arrived at their destination is in the nature of a condition precedent to the owner’s right to enforce recovery, that he must show in the first instance that he has complied with the condition, or that the circumstances were such that to have complied with it would have required him to do an unreasonable thing. The weight of authority, however, sustains the view that such a stipulation is more in the nature of a limitation upon the owner’s right to recovery, and that the burn of proof is according on the carrier to show that the limitation was reasonable and in proper form or within the time stated. (Southern Lines v. CA) Liability of shipper for delay in obtaining delivery of goods: Demurrage: The shipper is liable for lost earnings occasioned by the unnecessary delay in the use of the vehicle belonging to the carrier, due in turn to the failure of the goods at the place of destination, to unload forthwith and take away the cargo form the vehicles. Where delay in unloading of cargo not due to negligence of carrier it cannot be held liable for damages. Diligence shown by shipmaster to protect cargo from typhoon and pilferages exempts carrier from damages. (Philamgen v. CA) Demurrage – A charge which is permitted and recognized to afford compensation to the carrier for additional service and to obtain prompt release of the goods, and to prevent interference with the general traffic of the carrier. The extraordinary diligence in the vigilance over the goods tendered for shipment requires the common carrier to know and to follow the required precaution for avoiding damage to, or destruction of the goods entrusted to it for safe carriage and delivery. It requires common carriers to rencer service with the greatest skill and foresight and to use all reasonable means to ascertain the nature and characteristics of goods tendered for shipment and to exercise due care in the handling and stowing, including such methods as their nature requires. If the shipper or owner merely contribured to the loss, destruction or


- � -5deterioration of the goods, the proximate cause threof being the negligence of the common carrier, the latter shall be liable in damages, which however, shall be equitably reduced. (Compania Maritima v. CA) Demurrage, in its strict sense, is the compensation provided for in the contract of affreightment for the detention of the vessel beyond the time agreed on for loading and unloading. Essentially, demurrage is the claim for damages for failure to accept delivery. In a broad sense, every improper detention of a vessel may be considered a demurrage. Liability for demurrage, using the word in its strictly technical sense, exists only when expressly stipulated in the contract. Using the term in its broader sense, damages in the nature of demurrage are recoverable for a breach of the implied obligation to load or unload the cargo with reasonable dispatch, but only by the party to whom the duty is owed and only against one who is a party to the shipping contract. Notice of arrival of vessels or conveyances, or of their placement for purposes of unloading is often a condition precedent to the right to collect demurrage charges. (Magellan Manufacturing v. CA) Duty of Arrastre Operator: The legal relationship between the consignee and the arrastre operator is similar to that of a depositor and warehouseman. It is the duty of the arrastre to take good care of the goods that are in its custody and to the deliver the goods in its custody and to deliver them in good condition to the consignee, such responsibility also devolves upon the carrier. (Fireman’s Fund Insurance v. MetroPort Services) Duty of Stevedore: There is a distinction between an arrastre and a stevedore. Arrastre, a Spanish word which refers to hauling of cargo, comprehends the handling of cargo on the wharf or between the establishment of the consignee or shipper and the ship's tackle. The responsibility of the arrastre operator lasts until the delivery of the cargo to the consignee. The service is usually performed by longshoremen. On the other hand, stevedoring refers to the handling of the cargo in the holds of the vessel or between the ship's tackle and the holds of the vessel. The responsibility of the stevedore ends upon the loading and stowing of the cargo in the vessel. A stevedore is not a common carrier for it does not transport goods or passengers; it is not akin to a warehouseman for it does not store goods for profit. The loading and stowing of cargoes would not have a far reaching public ramification as that of a common carrier and a warehouseman; the public is adequately protected by our laws on contract and on quasi-delict. The public policy considerations in legally imposing upon a common carrier or a warehouseman a higher degree of diligence is not present in a stevedoring outfit which mainly provides labor in loading and stowing of cargoes for its clients. (Mindanao terminal v. Phoenix Assurance) Art. 1737. The common carrier's duty to observe extraordinary diligence over the goods 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. Effect of storing in transit: Does no interrupt the extraordinary responsibility of the common carrier. Exception: When the shipper or owner has made use of the right of stoppage in transitu. Stoppage in transitu: The act by which the unpaid vendor of goods stops their progress and resumes possession of them, while they are in the course of transit form him to the purchaser, and not yet actually delivered to the latter. When the right of stoppage in transitu may be exercised:

1. When buyer is/becomes insolvent 2. Unpaid seller has parted with possession of the goods 3. Prior to actual delivery to buyer.

- Unpaid seller may resume possession of the goods at any time, and he will become entitled to the same right as is he had not parted with the goods.

Responsibility of carrier when right is exercised: Extraordinary responsibility of to carrier ceases. The carrier holds the goods in the concept of a bailee or warehouseman and is liable only as such. The

care required is only such care in regard to the goods as a reasonable careful owner of similar goods would exercise. Art. 1738. The extraordinary liability of the common carrier 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 been advised of the arrival of the goods and has had reasonable opportunity thereafter to remove them or otherwise dispose of them. Effect of storage in warehouse of carrier: Extraordinary liability will cease only if the consignee has been advised of the arrival of the goods and has had reasonable time to remove them or otherwise dispose of them. When liability of warehouseman begins: Where the goods being transported upon arrival at the place of destination are stored in the carrier’s warehouse. It ceases when the consignee has been advised of the arrival of the goods, and he has had reasonable time to remove them or dispose of them. Art. 1739. In order that the common carrier may be exempted from responsibility, the natural disaster must have been the proximate and only cause of the loss. However, the common carrier must exercise due diligence to prevent or minimize loss before, during and after the occurrence of flood, storm or other natural disaster in order that the common carrier may be exempted from liability for the loss, destruction, or deterioration of the goods. The same duty is incumbent upon the common carrier in case of an act of the public enemy referred to in Article 1734, No. 2. Art. 1740. If the common carrier negligently incurs in delay in transporting the goods, a natural disaster shall not free such carrier from responsibility. Art. 1741. If the shipper or owner merely contributed to the loss, destruction or deterioration of the goods, the proximate cause thereof being the negligence of the common carrier, the latter shall be liable in damages, which however, shall be equitably reduced. Art. 1742. Even if the loss, destruction, or deterioration of the goods should be caused by the character of the goods, or the faulty nature of the packing or of the containers, the common carrier must exercise due diligence to forestall or lessen the loss. Art. 1743. If through the order of public authority the goods are seized or destroyed, the common carrier is not responsible, provided said public authority had power to issue the order. Art. 1744. A stipulation between the common carrier and the shipper or owner limiting the liability of the former for the loss, destruction, or deterioration of the goods to a degree less than extraordinary diligence shall be valid, provided it be: (1) In writing, signed by the shipper or owner; (2) Supported by a valuable consideration other than the service rendered by the common carrier; and (3) Reasonable, just and not contrary to public policy. Kinds of stipulation limiting liability: (H.E. Heacock Co. v. Macondray & Co.)

1. One exempting the carrier from any and all liability for loss or damage occasioned by its own negligence.

2. One providing for an unqualified limitation of such liability to an agreed valuation.

3. 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.

The 1st and 2nd kinds are invalid for being contrary to public policy, but the 3rd is valid and enforceable. A stipulation providing that the goods held by a common carrier are being transported at the owner’s risk unless the loss or damage is


- � -6caused by the negligence of the carrier is a valid one and does not contravene public policy. (Servando v. Philippine Steam) When the stipulation limiting liability is valid; Requisites:

1. The stipulation must be in writing, signed by both parties; 2. The stipulation is supported by a valuable consideration other

than the service rendered by the common carrier; and 3. The stipulation is reasonable, just and not contrary to public

policy. (Only applies when carrier is a common carrier, not private carrier.)

Stipulations limiting the liability of the contracting parties to a fixed sum of money is valid provided such stipulations are a) reasonable and just under the circumstance and b) has been fairly and freely agreed upon. (St. Paul Fire v. Macondray & Co.) The just and reasonable character of the stipulation is implicit in giving the shipper or owner the option of avoiding accrual of liability limitation by the simple and surely far from onerous expedient of declaring the nature and value of the shipment in the bill of lading. (Sea-Land Services v. IAC) Basic is the rule, long since enshrined as a statutory provision, that a stipulation limiting the liability of the carrier to the value of the goods appearing in the bill of the carrier to the value of the goods appearing in the bill of lading, unless the shipper or owner declares a greater value, is binding. (Citadel Lines v. CA) Validity of stipulations limiting liability of carrier:

1. A stipulation limiting the carrier’s liability to the value of the goods appearing in the bill, unless the shipper or owner declares a greater value, is valid and binding.

2. The insurer who pay the insured on his claim for damage is merely subrogated to the rights of the insured, and thus the insurer cannot collect from the carrier more than what the insured can collect from the carrier.

3. The obligation of the carrier to pay the damages begins form the date it fails to deliver the shipment in good condition to the consignee.

A bill of lading operates both as a receipt and as a contract. It is presumed that the stipulations of the bill were, in the absence of fraud, concealment or improper conduct, known to the shipper, and he is generally bound by his acceptance whether he reads the bill or not. However, this ruling applies only if such contracts will not create an absurd situation. If the questioned provision in the subject bill of lading has the effect of practically leaving the date of arrival of the subject shipment on the sole determination and will of the carrier, such may not be upheld. (Maersk Line v. CA) Contract between shipper and carrier is in the nature of a stipulation in favor of the consignee who is bound by it. He accepts the same by demanding delivery. Art. 1745. Any of the following or similar stipulations shall be considered unreasonable, unjust and contrary to public policy: (1) That the goods are transported at the risk of the owner or shipper; (2) That the common carrier will not be liable for any loss, destruction, or deterioration of the goods; (3) That the common carrier need not observe any diligence in the custody of the goods; (4) That the common carrier shall exercise a degree of diligence less than that of a good father of a family, or of a man of ordinary prudence in the vigilance over the movables transported; (5) That the common carrier shall not be responsible for the acts or omission of his or its employees; (6) That the common carrier's liability for acts committed by thieves, or of robbers who do not act with grave or irresistible threat, violence or force, is dispensed with or diminished; (7) That the common carrier is not responsible for the loss, destruction, or deterioration of goods on account of the defective

condition of the car, vehicle, ship, airplane or other equipment used in the contract of carriage. Art. 1746. An agreement limiting the common carrier's liability may be annulled by the shipper or owner if the common carrier refused to carry the goods unless the former agreed to such stipulation. Effect of consent obtained by refusal to carry goods: Makes the agreement limiting the liability of the carrier voidable at the instance of the shipper. Art. 1747. If the common carrier, without just cause, delays the transportation of the goods or changes the stipulated or usual route, the contract limiting the common carrier's liability cannot be availed of in case of the loss, destruction, or deterioration of the goods. Effect of delay in transportation: Common carrier cannot avail of the contract limiting his liability in 2 cases:

1. Where the common carrier delays the transportation of the goods

2. Common carrier changes the stipulated or usual route. In both cases, the delay or the change of route must be without just cause. Presumption of negligence in case of limited liability: Presumption still stands in case of loss, destruction or deterioration of the goods, but is still disputable and rebuttable, by evidence that the carrier exercised the requisite extraordinary diligence. Art. 1748. An agreement limiting the common carrier's liability for delay on account of strikes or riots is valid. Art. 1749. A stipulation that the common carrier's liability is limited to the value of the goods appearing in the bill of lading, unless the shipper or owner declares a greater value, is binding. Art. 1750. A contract fixing the sum that may be recovered. by the owner or shipper for the loss, destruction, or deterioration of the goods is valid, if it is reasonable and just under the circumstances, and has been fairly and freely agreed upon. Art. 1751. The fact that the common carrier has no competitor along the line or route, or a part thereof, to which the contract refers shall be taken into consideration on the question of whether or not a stipulation limiting the common carrier's liability is reasonable, just and in consonance with public policy. Effect of lack of competitor to carrier: Taken into consideration in determining whether the stipulation limiting liability is reasonable, just and not against public policy. Art. 1752. Even when there is an agreement limiting the liability of the common carrier in the vigilance over the goods, the common carrier is disputably presumed to have been negligent in case of their loss, destruction or deterioration. Art. 1753. The law of the country to which the goods are to be transported shall govern the liability of the common carrier for their loss, destruction or deterioration. Law governing contracts of transportation: Law of the place of destination. Art. 1754. The provisions of Articles 1733 to 1753 shall apply to the passenger's baggage which is not in his personal custody or in that of his employee. As to other baggage, the rules in Articles 1998 and 2000 to 2003 concerning the responsibility of hotel-keepers shall be applicable. Classes of baggage of passengers:

1. Baggage in the custody of the passengers or their employees


- � -72. Baggage not in the custody of the passengers or their

employees, but in the carrier. Liability for baggage in custody of passengers: Regarded as necessary deposits. Carriers liable as depositaries, provided:

1. notice was given to them or their employees; and 2. the passengers take precautions which the common carrier

or their substitutes advised relative to the care and vigilance of their baggage.

Responsibility for acts of employees: Responsible as depositary for loss or injury to the baggage in the personal custody of the passengers. But they are not responsible for force majeure. Responsibility for acts of thieves or robbers: The act of a thief/robber who has entered the vehicle is not deemed force majeure, unless it is done with the use of arms or through irresistible force. Common carriers are not responsible for the loss of the baggage in the personal custody of the passenger or its employees when the loss is due to the acts of the passengers, his family, servants, or visitors, or if the loss arises from the character of the baggage. Stipulations limiting liability: Common carrier cannot free himself from responsibility by posting notices to the effect that he is not liable for the baggage brought by the passengers. Any stipulation between the common carrier and passenger whereby responsibility in Arts. 1998 to 2001 is suppressed or diminished is void. Liability for baggage not in the custody of the passengers: The common carrier is required to observe extraordinary diligence. Carrier presumed negligent or at fault in case of loss of effects of passengers: The moment the effects of passengers are unconditionally placed in the possession and received by a carrier for conveyance, the law immediately imposes upon the latter extraordinary responsibility for the loss thereof, and this responsibility lasts until the actual or constructive delivery to the passenger. For loss, carrier presumed negligent, unless it observed extraordinary diligence in the vigilance over the goods or the loss was due to the causes under Art. 1734. Carrier liable for non-declared but accepted cargo: Liable even if not declared and charges thereon not paid, as long as it accepted them for transportation.

SUBSECTION 3. - Safety of Passengers Art. 1755. A common carrier is bound to carry the passengers safely as far as human care and foresight can provide, using the utmost diligence of very cautious persons, with a due regard for all the circumstances. Art. 1756. In case of death of or injuries to passengers, common carriers are presumed to have been at fault or to have acted negligently, unless they prove that they observed extraordinary diligence as prescribed in Articles 1733 and 1755. Common Carriers must exercise extraordinary diligence in carrying passengers: They are bound to carry passengers:

1. Safely 2. As far as human care and foresight can provide 3. With the utmost diligence of very cautious persons 4. With a due regard for all the circumstances

Extraordinary measures and diligence must be exercised by a common carrier for the safety of its passengers and their belongings. This includes firing an employee due to the threat he poses to the lives of the passengers. (PAL v. NLRC) A common carrier is obliged to transport its passengers to their destinations with the utmost diligence of very cautious persons. (Sulpicio Lines v. CA)

2 Complete defenses: 1. Fortuitous event 2. Extraordinary care (though the codal merely expresses the

view that it is rebuttable) A common carrier is exhorted to carry the passengers safely as far as human care and foresight can provide using the utmost diligence of very cautious persons. Once a passenger in the course of travel is injured, or does not reach his destination safely, the carrier and driver are presumed to be at fault. (Bacarro v. Catano) Though there is no obligation on the part of a street railway company to stop its car to take on intending passengers at other points than those appointed for stoppage, nevertheless when the motorman sees a person attempting to board the car while in motion, and at a place not appointed for stopping, he should not do any act to increase the peril of such person; if in violation of this duty, the motorman in charge of a car prematurely accelerates speed while the intending passenger is in the act of boarding the car, with the result that he slips and gets his foot crushed under the wheel of the moving car, the company is civilly liable in damages. (Del Prado v. MRR) It is the duty of common carriers of passengers, including common carriers by railroad train, streetcar, or motorbus, to stop their conveyances a reasonable length of time in order to afford passengers an opportunity to board and enter, and they are liable for injuries suffered by boarding passengers resulting from the sudden starting up or jerking of their conveyances while they are doing so. (Dangwa Transport v. CA) Presumption of negligence: In case of death or injury to passengers, common carriers are presumed to have been at fault or to have acted negligently. No need to prove negligence. Court need not make express finding of fault or negligence to hold the carrier responsible. (Vda. De Abeto v. PAL) Any injury that the suffered by the passenger is right away attributable to the fault or negligence of the carrier. Negligence on the part of the common carrier is presumed where the passenger suffers injuries. (Roque v. Buan) In an action based on a contract of carriage, the court need not make an express finding of fault or negligence on the part of the carrier in order to hold it responsible for the payment of the damages sought by the passenger. By the contract of carriage, the carrier assumes the express obligation to transport the passengers to their destination safely and to observe extraordinary diligence with a due regard for all the circumstances, and any injury that might be suffered by its passengers is right away attributable to the fault or negligence of the carrier. (Batangas Laguna Tayabas Bus Co. v. IAC) In an action based on a contract of carriage, the court need not make an express finding of fault or negligence on the part of the carrier in order to hold it responsible to pay the damages sought by the passenger. By the contract of carriage, the carrier assumes the express obligation to transport the passenger to his destination safely and to observe extraordinary diligence with a due regard for all the circumstances, and any injury that might be suffered by the passenger is right away attributable to the fault or negligence of the carrier. This is an exception to the general rule that negligence must be proved, and it is therefore incumbent upon the carrier to prove that it has exercised extraordinary diligence as prescribed in Articles 1733 and 1755 of the Civil Code. (Dangwa, supra.) Gross negligence amounting to bad faith in case of breach of contract of carriage shall warrant the award of moral damages. The same negligent acts may be the basis in finding a person liable under a quasi-delict and a breach of contract of carriage if the breach, independent of the contract, is an actionable wrong. (Fabre Jr. v. CA) How presumption of negligence is overcome: It must be shown that the carrier had observed the required extraordinary diligence, which


- � -8means that the carrier must show the “utmost diligence of very cautious persons… as far as human care and foresight can provide” or that the accident was caused by a fortuitous event. A common carrier's legal liability is the contract of carriage, and by entering into the said contract, it binds itself to carry the passengers safely as far as human care and foresight can provide, using the utmost diligence of a very cautious person, with a due regard for all the circumstances. - Common carriers should teach their drivers not to overload their vehicles, not to exceed safe and legal speed limits, and to know the correct measures to take when a tire blows up thus insuring the safety of passengers at all times. (Juntilla v. Fontanar) A common carrier, through its driver, and its registered owner, has the express obligation “to carry the passengers safely as far as human care and foresight can provide, using the utmost diligence of very cautious persons, with a due regard for all the circumstances,” and to observe extraordinary diligence in the discharge of its duty. The death of the wife of the petitioner in the course of transporting her to her destination gave rise to the presumption of negligence of the carrier. To overcome the presumption, respondents have to show that they observed extraordinary diligence in the discharge of their duty, or that the accident was caused by a fortuitous event. (Herminio Mariano v. Ildefonso Callejas) Requisites of caso fortuito:

1. The event must be independent of the human will 2. The occurrence must render it impossible for the obligor to

fulfill his obligation in a normal way 3. The obligor must be free of a concurrent or contributory fault

or negligence. (Gacal v. PAL) In consideration of the right granted to it by the public to engage in the business of transporting passengers and goods, a common carrier does not give its consent to become an insurer of any and all risks to passengers and goods. It merely undertakes to perform certain duties to the public as the law imposes, and holds itself liable for any breach thereof. (Pilapil v. CA) “Events which cannot be foreseen and which, having been foreseen are inevitable” – an event that takes place by accident and could not have been foreseen, like destruction of houses, unexpected fire, shipwreck, violence of robbers, etc. A carrier of passengers is not an absolute insurer against the risks of travel from which the passenger may protect himself by exercising ordinary care and diligence. (Lasam v. Smith) A caso fortuito is an event which could not be foreseen, or which, though foreseen, was inevitable. This requires that the following requirements be present: (a) the cause of the breach is independent of the debtor's will; (b) the event is unforeseeable or unavoidable; (c) the event is such as to render it impossible for the debtor to fulfill his obligation in a normal manner, and (d) the debtor did not take part in causing the injury to the creditor. (Calalas v. CA) If the cause of non-fulfillment of the contract is due to a fortuitous event, it has to be the sole and only cause. (PAL v. CA) If the event could have been foreseen and is avoidable, then it is not caso fortuito so as to exempt the common carrier from liability. (Fortune Express v. CA) A contract to transport passengers is quite different in kind, and degree from any other contractual relation. It is safe to conclude that it is a relationship imbued with public interest. Failure on the part of the common carrier to live up to the exacting standards of care and diligence renders it liable for any damages that may be sustained by its passengers. However, this is not to say that common carriers are absolutely responsible for all injuries or damages even if the same were caused by a fortuitous event. To rule otherwise would render the defense of "force majeure," as an exception from any liability, illusory and ineffective. (Japan Airlines v. CA)

In order to exempt a common carrier from liability, it is not only important to show that the cause of the accident was force majeure, but also that the common carrier has not been negligent in causing or in contributing to the injuries of its passengers. (Bachelor Express v. CA) Last clear chance rule not applicable to contracts of carriage: The principle about the “last clear chance” would call for application in a suit between the owners and drivers of the two colliding vehicles. It does not apply when the passenger demands responsibility from the carrier to enforce its contractual obligation. (Anuran v. Bruno) The last clear chance doctrine is not applicable when the passenger demands responsibility from the carrier to enforce its contractual obligations. It is only applicable in a suit between owners and drivers of vehicles. The presumption that the vehicle which bumped the rear of another is guilty only applies in a situation where the rear vehicle is following the other vehicle. This is because the rear vehicle is the one in control of the situation as it has the opportunity to observe the vehicle in front of it. (Philippine Rabbit v. IAC) Extraordinary diligence required of common carriers is calculated to protect the passengers from the tragic mishaps that frequently occur in connection with rapid modern transportation. This high standard of care is imperatively demanded by the precariousness of human life and by the consideration that every person must in every way be safeguarded against all injury. (Isaac v. A.L. Ammen Transportation Co., Inc.) Principles governing the liability of a common carrier: (Ibid.) (1) the liability of a carrier is contractual and arises upon breach of its obligation. There is breach if it fails to exert extraordinary diligence according to all circumstances of each case (2) a carrier is obliged to carry its passenger with the utmost diligence of a very cautious person, having due regard for all the circumstances (3) a carrier is presumed to be at fault or to have acted negligently in case of death of, or injury to, passengers, it being its duty to prove that it exercised extraordinary diligence (4) the carrier is not an insurer against all risks of travel. Article 1733 is not as unbending as the lower court has held, for it reasonably qualifies the extraordinary diligence required of common carriers for the safety of the passengers transported by them to be "according to all the circumstances of each case." In fact, Article 1755 repeats this same qualification: "A common carrier is bound to carry the passengers safely as far as human care and foresight can provide, using the utmost diligence of very cautious persons, with due regard for all the circumstances." (Nocum v. Laguna Tayabas Bus) Art. 1757. The responsibility of a common carrier for the safety of passengers as required in Articles 1733 and 1755 cannot be dispensed with or lessened by stipulation, by the posting of notices, by statements on tickets, or otherwise. Art. 1758. When a passenger is carried gratuitously, a stipulation limiting the common carrier's liability for negligence is valid, but not for wilful acts or gross negligence. The reduction of fare does not justify any limitation of the common carrier's liability. Ticket given to a passenger is a written contract: The ticket itself is a complete written contract by and between the shipper and the passenger. It has all the elements of a complete contract, namely:

1. The consent of the contracting parties manifested by the fact that the passenger boards the ship and the shipper consents or accepts him in the ship for transportation

2. Cause or consideration which is the fare paid by the passenger as state in the ticket

3. Object which is the transportation of the passenger from the place of departure to the place of destination which are stated in the ticket.

Dispensing with or limiting liability:


- � -9In general, extraordinary diligence required for the carriage of passengers cannot be dispensed with or lessened:

1. by stipulation 2. by the posting of notices 3. by statements on tickets 4. or otherwise.

Thus, as regards carriage of passengers, the common carrier and the passenger cannot enter into an agreement:

1. Absolutely exempting the carrier form liability from the passenger’s death of injuries;

2. Lessening the extraordinary diligence required by law. Exception: Gratuitous Carriage Gratuitous carriage: Common carrier and the passenger may stipulate limiting the common carrier’s liability for negligence. Limitation: Cannot stipulate to entirely eliminate the liability of the carrier. Reduction of fare: Does not justify any limitation of the common carrier’s liability. The law requires no less that a gratuitous carriage of a passenger to justify the carrier’s limited liability. Thus, in the carriage of passengers, a stipulation limiting the liability in writing, signed by the parties, supported by a sufficient consideration, and not contrary to law, would be void, where the passenger is not carried gratuitously, even when the fare is reduced. Liability of owner of common carrier to accommodation passengers or invited guests: They merely owe a duty to exercise reasonable care so that the passenger is transported safely to their destination. They owe a duty to exercise reasonable care in the operation of the vehicle, and not unreasonably expose the passenger to danger and injury by increasing the hazards of travel. The owner or operator of an automobile owes the duty to an invited guest to exercise reasonable care in its operation, and not unreasonably to expose him to danger and injury by increasing the hazard of travel. This rule, as frequently stated by the courts, is that an owner of an automobile owes a guest the duty to exercise ordinary or reasonable care to avoid injuring him. Since one riding in an automobile is no less a guest because he asked for the privilege of doing so, the same obligation of care is imposed upon the driver as in the case of one expressly invited to ride". Defendant, therefore, is only required to observe ordinary care, and is not in duty bound to exercise extraordinary diligence as required of a common carrier by our law (Articles 1755 and 1756, new Civil Code). (Lara v. Valencia) 3 Remedies against common carriers:

1. Administrative – action before the public service commission 2. Civil – action for damages under the civil code 3. Criminal – action under the RPC.

Art. 1759. Common carriers are liable for the death of or injuries to passengers through the negligence or willful acts of the former's employees, although such employees may have acted beyond the scope of their authority or in violation of the orders of the common carriers. This liability of the common carriers does not cease upon proof that they exercised all the diligence of a good father of a family in the selection and supervision of their employees. Failure to perform a contract cannot be excused upon the ground that the breach was due to the negligence of a servant of the obligor, and that the latter exercised due diligence in the selection and control of the servant. (Cangco v. Manila Railroad) Art. 1760. The common carrier's responsibility prescribed in the preceding article cannot be eliminated or limited by stipulation, by the posting of notices, by statements on the tickets or otherwise. Liability for negligence or willful acts of employees: Common carrier cannot escape liability by interposing the defense that the

employees causing the injury or death acted without authority or against the orders of the common carrier. They also cannot use the defense of diligence on the supervision and selection of employees. Premature announcement of the next stop by the employee of the carrier, which caused the death of a child and her grandmother, was made the basis of the liability of the common carrier. - It is a matter of common knowledge and experience about common carriers like trains and buses that before reaching a station or flagstop they slow down and the conductor announces the name of the place. It is also a matter of common experience that as the train or bus slackens its speed, some passengers usually stand and proceed to the nearest exit, ready to disembark as the train or bus comes to a full stop. This is especially true of a train because passengers feel that if the train resumes its run before they are able to disembark, there is no way to stop it as a bus may be stopped. (Brinas v. People) The rule is settled that a driver in abandoning his proper lane for the purpose of overtaking another vehicle in an ordinary situation has the duty to see to it that the road is clear and not to proceed if he cannot do so in safety. When a motor vehicle is approaching or rounding a curve, there is special necessity to keep to the right side of the road and the driver does not have the right to drive on the left hand side relying upon having time to return to the right if a car approaching from the opposite direction comes into view. (Mallari v. CA) Liability of carrier for defects of its equipment: While the carrier is not an insurer of the safety of the passengers, it should nevertheless be held to answer for the laws its equipment if such flaws were at all discoverable. In this connection, the manufacturer of the defective appliance is considered in law the agent of the carrier, and the good repute of the manufacturer will not relieve the carrier from liability. The rationale of the carrier’s liability is the fact that the passenger has no privity with the manufacturer of the defective equipment; hence, he has no remedy against him, while the carrier usually has. (Necessito v. Paras) It is enough that the assault happens within the course of the employee's duty. It is no defense for the carrier that the act was done in excess of authority or in disobedience of the carrier's orders. The carrier's liability here is absolute in the sense that it practically secures the passengers from assaults committed by its own employees. At least three very cogent reasons underlie this rule. (1) the special undertaking of the carrier requires that it furnish its passenger that full measure of protection afforded by the exercise of the high degree of care prescribed by the law, inter alia from violence and insults at the hands of strangers and other passengers, but above all, from the acts of the carrier's own servants charged with the passenger's safety; (2) said liability of the carrier for the servant's violation of duty to passengers, is the result of the former's confiding in the servant's hands the performance of his contract to safely transport the passenger, delegating therewith the duty of protecting the passenger with the utmost care prescribed by law; and (3) as between the carrier and the passenger, the former must bear the risk of wrongful acts or negligence of the carrier's employees against passengers, since it, and not the passengers, has power to select and remove them. (Maranan v. Perez) The rationale of the carrier's liability is the fact that the passenger has neither choice nor control over the carrier in the selection and use of the equipment and appliances in use by the carrier. Having, no privity whatever with the manufacturer or vendor of the defective equipment, the passenger has no remedy against him, while the carrier usually has. It is but logical, therefore, that the carrier, while not an insurer of the safety of his passengers, should nevertheless be held to answer for the flaws of his equipment if such flaws were at all discoverable. (Ibib, MR to first case) Where the cause of a tire blow-out is known and attributed to the common carrier, the blow-out cannot be considered caso fortuito. (La Mallorca and Pampanga Bus Co. v. De Jesus, et al.)


- � -10An accident caused by defects in the automobile is not a caso fortuito. The rationale of the carrier’s liability ist he fact that the passenger has neither the choice nor control over the carrier in the selection and use of the equipment and appliances in use by the carrier. When a passenger dies or is injured, the presumption is that the common carrier is at fault or that it acted negligently. (Landignin v. Pangasinan Transportaion Co.) A passenger is entitled to recover damages from a carrier for an injury resulting from a defect in an appliance purchased from a manufacturer, whenever it appears that the defect would have been discovered by the carrier if it had exercised the degree of care which under the circumstances was incumbent upon it, with regard to inspection and application of the necessary tests. (Juntilla, supra.) The explosion of a tire found to be brand new and of a reputable brand is not ipso facto due to a fortuitous event, and the carrier must still show that it has not been negligent in carrying on its contract. The state of the tire (being new) does not remove the possibility of improper mounting, too much air pressure and the like. (Yobido v. CA) The rationale of the carrier's liability is the fact that the passenger has neither choice nor control over the carrier in the selection and use of the equipment and appliances in use by the carrier. Having, no privity whatever with the manufacturer or vendor of the defective equipment, the passenger has no remedy against him, while the carrier usually has. It is but logical, therefore, that the carrier, while not an insurer of the safety of his passengers, should nevertheless be held to answer for the flaws of his equipment if such flaws were at all discoverable. (Batangas Trans. v. Caguimbal) Carrier exempt where the personal violence is fortuitous: Liability of carrier for violence extends only to those which the carrier could foresee or avoid through the exercise of the degree of diligence required of it. Carrier exempt from acts of employee not done in line of duty: While a passenger is entitled to protection from personal violence by the carrier or its agents or employees, since the contract of transportation obligates the carrier to transport a passenger safely to his destination, the responsibility of the carrier extends only to those acts that the carrier could foresee or avoid through the exercise of the degree of care and diligence required of it. Where the crime was committed by a train guard who had no duties to discharge in connection with the transportation of the victim, the crime stands on the same footing as if committed by a stranger or co-passenger, since the killing was not done in the line duty. (Gillaco v. Manila Railroad) Carrier’s liability is not discharged by erroneous affidavits of claimants for damages: Signed statements of persons claiming damages for breach of contract expressing their belief that the transportation company are not liable for the accident are no proof that the latter has discharged its liability to the claimants were such belief is erroneous and said claimants are ignorant or illiterate. A waiver, to be valid and effective, must in the first place be couched in clear and unequivocal terms which leave no doubt as to the intention of a person to give up a right or benefit which legally pertains to him. A waiver may not casually be attributed to a person when the terms thereof do not explicitly and clearly evidence an intent to abandon a right vested in such person. To uphold a supposed waiver of any right to claim damages by an injured passenger, under circumstances like those exhibited in this case, would be to dilute and weaken the standard of extraordinary diligence exacted by the law from common carriers and hence to render that standard unenforceable. (Gatchalian, supra.) When relationship of carrier and passenger terminates: The relation of carrier and passenger does not cease at the moment the passenger alights from the carrier’s vehicle at a place selected by the carrier at the point of destination, but continues until the passenger has had a reasonable time and opportunity to leave the carrier’s premises.

And what is reasonable time or a reasonable delay within this rule is to be determined from the circumstances. (La Mallorca v. CA) The relation of carrier and passenger does not cease at the moment the passenger alights from the carrier’s vehicle at a place selected by the carrier at the point of destination, but continues until the passenger has had a reasonable time and opportunity to leave the carrier’s premises. And what is reasonable time or a reasonable delay within this rule is to be determined from the circumstances. (Ibid.) The relation of carrier and passenger continues until the passenger has been landed at the port of destination and has left the vessel owner’s dock or premises. The relationship will not ordinarily terminate until the passenger has, after reaching his destination, safely alighted from the carrier’s conveyance or had a reasonable opportunity to leave the carrier’s premises. All persons who remain on the premises 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. The reasonableness of time should be made to depend on the attending circumstances of the case, such as the kind of common carrier, the nature of its business, the customs of the place, and so for, and therefore precludes a consideration of the time element per se without taking into account such other factors. The primary factor to be considered is the existence of a reasonable cause as will justify the presence of the victim on or near the carrier. (Aboitiz Shipping Corporation v. Court of Appeals) Elimination of limitation of carrier’s liability: Liability of the carrier for the negligence or willful acts of his employees which cause death of or injury to passengers cannot be eliminated or limited:

1. by stipulation 2. by posting of notices 3. by statements on the tickets 4. or otherwise

Art. 1761. The passenger must observe the diligence of a good father of a family to avoid injury to himself. Art. 1762. The contributory negligence of the passenger does not bar recovery of damages for his death or injuries, if the proximate cause thereof is the negligence of the common carrier, but the amount of damages shall be equitably reduced. Art. 1763. A common carrier is responsible for injuries suffered by a passenger on account of the wilful acts or negligence of other passengers or of strangers, if the common carrier's employees through the exercise of the diligence of a good father of a family could have prevented or stopped the act or omission. The law does not protect the negligence of the passenger: It is presumed that persons intend the natural consequences of his acts, and that they exercise diligence with respect to themselves. The law is basically not one-sided. Diligence required of the passenger: Diligence of a good father of a family to avoid injury to himself. Not extraordinary diligence. Effect of negligence of passenger: If the negligence of the passenger is the proximate cause of the injury or death, then the common carrier is exempt from liability. If it is merely contributory, damages to be awarded will only be mitigated. Liability for acts of strangers: Common carrier is still liable if its employee could have prevented the injury through the exercise of the diligence of a good father of a family. (See Manila Railroad v. Ballesteros) Liability for acts of passengers: Carrier only liable from injuries caused by other passengers on another passenger, if the employees could have prevented it by the exercise of the diligence of a good father


- � -11of a family to prevent the injury. It does not apply to death caused by the acts of other passengers or strangers. Degree of diligence required of carrier’s employees: Merely that of a good father of a family, and not extraordinary diligence. The law only speaks of the common carrier’s liability for injuries to a passenger, but not for his death, when it deals with the willful acts or negligence of other passengers or strangers.

SUBSECTION 4. - Common Provisions Art. 1764. Damages in cases comprised in this Section shall be awarded in accordance with Title XVIII of this Book, concerning Damages. Article 2206 shall also apply to the death of a passenger caused by the breach of contract by a common carrier. Article 1764 of the Civil Code, expressly makes Article 2206 applicable "to the death of a passenger caused by the breach of contract by a common carrier." Accordingly, a common carrier is liable for actual or compensatory damages under Article 2206 in relation to Article 1764 of the Civil Code for deaths of its passengers caused by the breach of the contract of transportation. (Sulpicio Lines v. CA) Art. 1765. The Public Service Commission may, on its own motion or on petition of any interested party, after due hearing, cancel the certificate of public convenience granted to any common carrier that repeatedly fails to comply with his or its duty to observe extraordinary diligence as prescribed in this Section. Art. 1766. In all matters not regulated by this Code, the rights and obligations of common carriers shall be governed by the Code of Commerce and by special laws.

CARRIAGE OF GOODS

CARRIAGE OF

PASSENGERS

Parties

1. Common carrier

2. Shipper

3. Consignee

1. Common carrier

2. Passenger

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 the

possession of, and received

b y t h e c a r r i e r f o r

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

temporari ly unloaded or

stored in transit unless the

shipper or owner has made

use of the right of stoppage in

transitu. (Art. 1737)

! I t c o n t i n u e s t o b e

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

g o o d s a n d h a s h a d

reasonab le oppo r tun i t y

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)

The duty of a common

carrier to provide safety to its

passengers so obligates it

not only during the 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

a n d p r e p a r e f o r h i s

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


- � -12

Art.1735 Civil Code

Reason: 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)

Mere 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)

Art.1755 Civil Code

R e a s o n : T h e c o n t r a c t

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.

Defenses

1. O r d i n a r y

c i r c u m s t a n c e :

E x e r c i s e o f

e x t r a o r d i n a r y

d i l i g e n c e ( A r t .

1735)

2. S p e c i a l

circumstances:

a. Flood, storm,

earthquake,

l ight ing, or

other natural

d isaster or

c a l a m i t y

(p lus force

majeure)

b. A c t o f t h e

public enemy

i n w a r ,

w h e t h e r

international

or civil

c. A c t o r

omission of

the shipper

or the owner

of goods

d. T h e

character of

the goods or

defects in the

packing or in

t h e

containers

e. Order or act

of competent

p u b l i c

authority (Art.

1734)

1. E x e r c i s e o f

extraordinary

diligence (Art.

1756)

2. Caso fortuito

Valid stipulations

1. Reduction of degree of

d i l i g e n c e t o o r d i n a r y

diligence, provided it be:

a. In writing, signed

by the shipper or

owner;

b. Supported by a

v a l u a b l e

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

s h i p p e r f o r t h e l o s s ,

destruction or deterioration of

the goods, if it is reasonable

a n d j u s t u n d e r t h e

circumstances and has been

fairly and freely agreed upon.

(Art. 1750)

3. Limited liability for delay:

An agreement limiting the

common carrier’s 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


- � -13

Title XVIII. - DAMAGES

Art. 2197. Damages may be: (1) Actual or compensatory; (2) Moral; (3) Nominal; (4) Temperate or moderate; (5) Liquidated; or (6) Exemplary or corrective. Actual damages – Compensation commensurate with the pecuniary loss sustained by the person injured. Moral damages - include physical suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation, and similar injury. Nominal Damages – Damages awarded to vindicate a right which has been violated. Temperate damages – Damages awarded when some pecuniary loss has been suffered but its amount cannot, from the nature of the case, be proved with certainty. Liquidated damages – agreed upon by the parties to a contract to be paid in case of breach thereof. (Thus, existence of a contract is a necessary prerequisite).

Exemplary damages – punitive or corrective damages, to serve as an example to the public, which actually punishes the attitude of the person who caused the damage. Xxx Art. 2199. Except as provided by law or by stipulation, one is entitled to an adequate compensation only for such pecuniary loss suffered by him as he has duly proved. Such compensation is referred to as actual or compensatory damages. Fundamental rule on damages. The fundamental principle of the law of damages is that one injured by a breach of a contract or by a wrongful or negligent act or omission shall have fair and just compensation commensurate with the loss sustained in consequence of the defendant’s act, which gives rise to the action. Hence, actual pecuniary compensation is the general rule, whether the action is on contract or in tort, except where the circumstances warrant the allowance of exemplary damages. The party claiming damages must establish by competent evidence the amount of such damages and courts can not give judgment for a greater amount than that actually proven. Actual damages must be proved and a court cannot rely on speculation, conjecture or guesswork as to the fact and amount of damages, but must depend on actual proof that damages had been suffered and on evidence of the actual amount. Actual or compensatory damages cannot be presumed but must be duly proved. Actual or compensatory damages: those awarded to the aggrieved party as adequate compensation only for such pecuniary loss suffered by him as he has alleged and duly proved. Pecuniary loss is a measurement in terms of money. Purpose or Aim of Actual damages: Make good or replace the loss caused by the wrong. They proceed from a sense of natural justice, and are designed to repair that of which one has been deprived by the wrong of another. They are primarily intended to simply make good or replace the loss caused by a wrong. Allegation and proof: Claims for actual/compensatory damages must be especially alleged and substantiated by proof. Generally, what is not alleged, may not be proved. How to collect actual damages: 1.) Plead or allege the loss GENERAL DAMAGE - natural, necessary and logical consequences of a particular wrongful act, which result in injury; need not be specifically pleaded because the law itself implies or presumes that they resulted from the wrongful act. SPECIAL DAMAGES - damages which are the natural, but not the necessary and inevitable result of the wrongful act; need to be pleaded 2.) Pray for the relief that claim for loss be granted 3.) Prove the loss “Except as provided by law or by stipulation”: The general rule that damages must be proved is subject to the following exceptions: 1) When a penalty clause is agreed upon in the contract between the parties (Art. 1226) 2) When liquidated damages have been agreed upon (Art. 2226) 3) When loss is presumed as when a child or spouse dies as a result of an act of a person. 4) Forfeiture of bonds in favor of the Government for the purpose of promoting public policy or interest. 5) Death caused within the contemplation of Art. 2206. (damages as a result of death due to a crime or quasi-delict). In these situations, actual or compensatory damages need not be proved. Limit on the award for damages: In no instance shall the judge grant damages more than what had been proved in court.

1. That the goods are

transported at the risk of

the owner or shipper;

2. That carrier will not be

l iable for any loss,

d e s t r u c t i o n o r

deter iorat ion of the

goods;

3. That the carrier need

n o t o b s e r v e a n y

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. Tha t t he ca r r i e r ’ s

l i a b i l i t y f o r a c t s

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,

d e s t r u c t i o n o r

deter iorat ion 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)

Dispensing with or lessening

t h e e x t r a o r d i n a r y

responsibility of a common

carrier for the safety of

passengers imposed by law

by stipulation, by posting of

notices, by statements on

tickets or otherwise. (Art.

1757)


- � -14Actual damages must be: 1) Duly proved; and 2) Proved with reasonable degree of certainty. The general rule is that there must be documentary proof of such actual damages. Documentary proof need not be actual receipts, but may be a statement of account showing expenses incurred in the hospital for the treatment of injuries sustained as a result of the breach of contract of carriage. (R Transport v. Pante) The amount of damages for death caused by a crime or quasi- delict shall be at least three thousand pesos, even though there may have been mitigating circumstances. In addition: (1) The defendant shall be liable for the loss of the earning capacity of the deceased, and the indemnity shall be paid to the heirs of the latter; such indemnity shall in every case be assessed and awarded by the court, unless the deceased on account of permanent physical disability not caused by the defendant, had no earning capacity at the time of his death. (PAL v. CA) Under Article 2206 of the Civil Code, the amount of damages for death caused by a crime or quasi-delict shall be at least three thousand pesos, even though there may have been mitigating circumstances. In addition: The defendant shall be liable for the loss of the earning capacity of the deceased, and the indemnity shall be paid to the heirs of the latter. Loss of pension is also lost income to be paid by the carrier. (De Caliston v. CA) Nominal damages cannot co-exist with actual damages. (Armovit v. CA) Art. 2200. Indemnification for damages shall comprehend not only the value of the loss suffered, but also that of the profits which the obligee failed to obtain. (1106) Actual/compensatory damages are classified as follows: 1) Damnum emergens - this is the value of actual pecuniary loss for what the claimant already possessed before the incident which must be supported by receipts or the best evidence available. 2) Lucrum cessans – this refers to the expected profits which were not realized by reason of the act of the offender or tortfeasor. Legal interest for the breach of contract of carriage commences from the promulgation of the judgment of the Trial Court and not by the Court of Appeals. In addition, as an exception to the general rule, the heirs of the victims who did not appeal the judgment, shall be afforded equitable relief by the courts as it must be vigilant for their protection. Their claim for legal interest and increase in the indemnity should be entertained in spite of their failure to appeal the lower court judgment. (de Lima v. LTB) Art. 2201. In contracts and quasi-contracts, the damages for which the obligor who acted in good faith is liable shall be those that are the natural and probable consequences of the breach of the obligation, and which the parties have foreseen or could have reasonably foreseen at the time the obligation was constituted. In case of fraud, bad faith, malice or wanton attitude, the obligor shall be responsible for all damages which may be reasonably attributed to the non-performance of the obligation. (1107a) There are two important considerations which must be borne in mind in the application of the above-quoted legal provision: First, distinguish debtor in good faith from debtor in bad faith. Debtor in good faith - liable only for the damages which are the “natural and probable consequences of the breach of the obligation, and which the parties have foreseen or could have reasonably foreseen at the time the obligation was constituted”. Debtor in bad faith - liable “for all damages which may be reasonable attributed to the non-performance of the obligation” without regard to whether such damages could be foreseen or not; and Second, damages are only those which represent the “loss suffered” and “the profits which the obligee failed to obtain”. In

other words, the damages recoverable under Art. 2201 of the Civil Code, is limited to the kinds of damages specified in Art. 2200. Damages in Contracts and Quasi-Contracts: 1. Damages in case of Good faith -

a. Natural and probable consequence of breach of obligation, and b. Parties have forseen or could have reasonably forseen at time obligation was constituted

2. Damages in case of bad faith a. it is sufficient that damages may be reasonably attributed to the non-performance of the obligation

Example of damages which were the natural and probable consequence of the breach, but could not have been reasonably foreseen at the time the parties entered into the contract: Remember Mendoza v PAL? In that case the subject of the contract was a can of film to be delivered from Manila to Bicol, to be used in the town fiesta. There was delay, thus it did not arrive during the town fiesta, causing loss of profits for the cinema owner. The loss of profits was said to have not been foreseeable at the time the parties entered into the contract, but was the natural consequence of the delay in the delivery of the film. This was not foreseeable because, on the part of the carrier, it did not know what the can of film was for, thus, it had no knowledge that if it did not deliver it at a particular time, loss of profits would be incurred by the other party. if it were appraised of all the details, then the loss of profits would have been foreseeable, and it could have been ordered to pay for such. Foreseeability must be on the part of both parties. This is also the reason why exemplary and moral damages are not generally recoverable in breach of contract, they are not foreseeable. They only become foreseeable when there was already some ill will or intent on the part of the carrier (bad faith, fraud, wanton, malicious, reckless, oppressive and deliberate manner), which thus gives rise to the breach. In such a case, carrier already knows that the passenger would suffer moral anguish, etc. thus, damage foreseeable. Under Art. 2201, the damages for which the obligor in good faith is liable shall be those that are the natural and probable consequences for the breach of obligation, and which the parties have foreseen or could have foreseen at the time the obligation was constituted. For example, if A, a student in med school, dies while a passenger of a jeepney, it was foreseeable that if he dies, he would not finish school thus not earning as a doctor. The income he would have received as a doctor would thus be foreseeable damages, and should be awarded as actual damages. (Carriaga v. LTB) As a rule, documentary evidence should be presented to substantiate the claim for damages for loss of earning capacity. By way of exception, damages for loss of earning capacity may be awarded despite the absence of documentary evidence when: 1) the deceased is self-employed and earning less than the minimum wage under current labor laws, in which case, judicial notice may be taken of the fact that in the deceased’s line of work, no other documentary evidence is available; or 2) the deceased is employed as a daily wage worker earning less than the minimum wage under current labor laws. (Philippine Hawk v. Tan Lee) The amount recoverable is not loss of the entire earnings but rather loss of that portion of the earnings which the beneficiary would have received. In other words, only net earnings not gross earnings are to be considered. The determination of such actual damages resulting from death due to breach of contract of carriage depends, mainly on 2 factors:

1. The number of years on the basis of which the damages shall be computed; and

2. The rate at which the losses sustained should be fixed.(Villa Rey Transit v. CA)

The amount recoverable by the heirs of a victim of tort is not loss of the entire earnings, but rather the loss of that portion of the earnings which the beneficiary would have received. In other words, only net earnings,


- � -15not gross earnings, are to be considered, that is, the total of the earnings or income and less living and other incidental expenses. (Davila v. PAL) xxx Art. 2203. The party suffering loss or injury must exercise the diligence of a good father of a family to minimize the damages resulting from the act or omission in question. Mitigating damages - article 2203 “Duty to Mitigate” The party injured must exercise diligence to minimize the damages arising out of the act or omission. The Duty to Mitigate only applies to actual damages. The claimant must show that the damages he suffered was not avoidable – it must also be reasonable. First principle in mitigation: one cannot recover for avoidable loss. Efforts to mitigate the loss must be REASONABLE. If refusal is due to religious grounds, is the refusal reasonable? The duty to mitigate, efforts exerted by the complainant must be reasonable, with respect to him, and in the circumstances. What is reasonable, is that which is reasonable to the judge; a prudent man/good father of a family really means the judge. Corollary to the first principle, if one incurs expenses to mitigate the loss, expenses are recoverable, even if the resulting loss would have been less if the expenses have not been incurred. Ex. additional expenses after botched operation, even if resulting loss is greater than if mitigation is not undertaken. Third, if the duty to mitigate was successful, loss is avoided, there is no loss, thus you cannot recover for avoided loss. Duty to mitigate is an ever present duty on the part of the plaintiff, whether liability is due to a contract or quasi-delict. The standard is, is it reasonable for you to find the alternative? Various factors must be taken into account, and is thus based on circumstances. Mitigation of damages in contracts, quasi-contracts and quasi-delicts: The reason for the mitigation of damages in quasi-delict is the contributory negligence of the plaintiff although the immediate and proximate cause of his damage is still mainly the negligence or omission of the defendant. Contracts and quasi-contracts are mentioned together with quasi-delicts. But, certain actual damages are not recoverable.

! Instances of Grounds for Mitigation of Damages: 1) For contracts: - Violation of terms of the contract by the plaintiff himself

- Obtention or enjoyment of benefit/s under the contract by the plaintiff himself - Defendant acted upon advice of counsel in cases where exemplary damages are to be awarded, such as under Art. 2230, 2231 and 2232 - Defendant has done his best to lessen the plaintiff’s injury or loss. 2) For quasi-contracts - In cases where exemplary damages are to be awarded such as in Art. 2232 - Defendant has done his best to lessen the plaintiff’s injury or loss. 3) For quasi-delicts - That the loss would have resulted in any event because of the negligence or omission is the immediate and proximate cause of the damage or injury. - Defendant has done his best to lessen the plaintiff’s injury. Enumeration of mitigating events, not limited: The 5 circumstances mentioned in the law are not exclusive. Other circumstances of similar nature may be considered to mitigate the damages imposable upon the offending party. xxx Art. 2205. Damages may be recovered: (1) For loss or impairment of earning capacity in cases of temporary or permanent personal injury; (2) For injury to the plaintiff's business standing or commercial credit.

! Xxx Under the law, independently of its financial capacity, the common carrier, if liable, must be made to pay the minimum amount provided in Art. 2206. But if its financial ability is such that ut can pay a greater amount of indemnity as demanded by the circumstances of the case, then certainly it should be made to pay more than PhP3,000. Its financial standing is material to ascertain the amount of damages as indemnity for death, and thus, is material in a case for damages for breach of contract resulting in death of a passenger. (PANTRANCO v. Legaspi) According to Art. 2206, par. 1, the defendant shall be liable for the loss of earning capacity of the deceased and indemnity shall be paid to the heirs of the latter. This Article, while referring to damages for death caused by crime of delict, is expressly made applicable by Art. 1764 to the death of a passenger caused by the breach of contract by a common carrier. (Davila v. PAL) Article 2206 of the Civil Code of the Philippines provides that only deaths caused by a crime as quasi delict are entitled to actual and compensatory damages without the need of proof of the said damages. The amount of damages for death caused by a crime or quasi delict shall be at least Three Thousand Pesos, even though there may have been mitigating circumstances. Deducing alone from said provision,

Non-recoverable damages: 1) Avoidable loss 2) Not properly pleaded in the complaint or inadequately proven 3) Remote damages, not caused by defendant's act or negligence, and is not proximate cause. 4) Damnum absque injuria, there is damage, but there is no legal injury. Defendant's act or omission is lawful, there is no liability for damages, even if there be injury to the claimant. 5) Self-inflicted damages/injury. 6) Speculative damages, based on mere conjecture or surmises, and not duly substantiated. 7) In breach of contract in good faith, actual damages not actually foreseen by both parties, not just one.

For Crimes, quasi-delicts and breach of contract of carriage: Compensation for lost Income: Net Earning Capacity = [2/3 x (80 – age)] x (gross annual income – reasonable and necessary living expenses of deceased)

- if there is lack of proof of living expenses of deceased, net earnings are computed at 50% of gross earnings.

Cost of living of deceased = total expenses of family/# of persons in the family Life Expectancy = [2/3 x (80 – age)] Indemnity for death: Crimes resulting in death = automatic PhP50,000 If attended by treachery = additional PhP25,000


- � -16one can conclude that damages arising from culpa contractual are not compensable without proof of special damages sustained by the heirs of the victim. (Sulpicio v. CA and Tabuquilde) Indemnity for death has been increased to PhP50,000 based on recent jurisprudence. (Sulpicio v. CA) xxx Art. 2207. If the plaintiff's property has been insured, and he has received indemnity from the insurance company for the injury or loss arising out of the wrong or breach of contract complained of, the insurance company shall be subrogated to the rights of the insured against the wrongdoer or the person who has violated the contract. If the amount paid by the insurance company does not fully cover the injury or loss, the aggrieved party shall be entitled to recover the deficiency from the person causing the loss or injury. xxx Art. 2215. In contracts, quasi-contracts, and quasi-delicts, the court may equitably mitigate the damages under circumstances other than the case referred to in the preceding article, as in the following instances: (1) That the plaintiff himself has contravened the terms of the contract; (2) That the plaintiff has derived some benefit as a result of the contract; (3) In cases where exemplary damages are to be awarded, that the defendant acted upon the advice of counsel; (4) That the loss would have resulted in any event; (5) That since the filing of the action, the defendant has done his best to lessen the plaintiff's loss or injury. Any circumstance which mitigates the injury sustained by breach of contract must be considered in measuring the damages. Damages arising from the plaintiff’s breach of the contract on which he sues may be shown to reduce his claim and the defendant may also show that even had he himself performed his contract, the plaintiff would not have been able to do so. Any benefit derived by the plaintiff under a contract must be charged against him in the assessment of damages for its breach. The defendant, however, is not entitled to any deduction of that which was to occur subsequently to a discharge of his liability under the terms of his contract. Art. 2216. No proof of pecuniary loss is necessary in order that moral, nominal, temperate, liquidated or exemplary damages, may be adjudicated. The assessment of such damages, except liquidated ones, is left to the discretion of the court, according to the circumstances of each case. Proof of pecuniary loss is required in actual or compensatory damages. They must be alleged and proved, and must not be presumed. But, insofar as the other damages are concerned, no proof of pecuniary loss is required. HOWEVER, there is a long line of decisions that for the court to be able to use its discretion in determining the amounts of said damages, it is essential that “there should be a clear showing of the facts giving rise to such damage” as may be inferred from Art. 2217. Art. 2217. Moral damages include physical suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation, and similar injury. Though incapable of pecuniary computation, moral damages may be recovered if they are the proximate result of the defendant's wrongful act for omission. As a general rule, moral damages may not be awarded to an artificial/juridical person.

! Art. 2220. Willful injury to property may be a legal ground for awarding moral damages if the court should find that, under the circumstances, such damages are justly due. The same rule applies to breaches of contract where the defendant acted fraudulently or in bad faith. While no proof of pecuniary loss is necessary in order that moral damages may be awarded, the amount of the indemnity being left to the discretion of the court, nevertheless, it is still essential that the claimant should satisfactorily prove the factual basis of the moral damages and its causal relation to the defendant’s acts. Why? This is so because moral damages, although incapable of pecuniary estimation, are in the category of an award designed to compensate the claimant for the actual injury suffered and not to impose a penalty on the wrongdoer. The same principle applies to exemplary damages. They are not intended to enrich a complainant at the expense of a defendant. They are awarded only to enable the injured party to obtain means, diversion or amusement that will serve to alleviate the moral suffering he has undergone, by reason of the defendant’s culpable action. Art. 2219 of the civil code enumerates the instances when moral damages may be recovered. Plaintiff’s claim for moral damages not falling under any one of them, the same cannot be granted. Moral damages cannot also be collected on account of breach of contract if there is no proof that defendant did not act fraudulently or in bad faith in connection therewith. (Carriaga v. LTB) The right to moral damages is based on equity and he who comes to court to demand equity must come with clean hands. When recoverable: Can only be awarded in cases falling within Art. 2219 and 2220, as a rule. It must also be established that the act/omission of the defendant is the proximate cause of the damage or injury suffered by the plaintiff. It cannot be recovered in the absence of a wrongful act of omission or fraud or bad faith. Moral damages not recoverable in breach of contract of transportation: General Rule: In actions for damages predicated on breach of contract of transportation, moral damages are not recoverable. Exceptions: 1) Where the mishap results in the death of the passenger; 2) Where it is proved that the carrier was guilty of fraud or bad faith, even if death does not result (Fores v Miranda). Fraud, malice or bad faith must be proved, and mere carelessness of the driver does not per se constitute or justify an inference of malice or bad faith on the carrier’s part. With respect to the award of moral damages, the general rule is that said damages are not recoverable in culpa contractual except when the presence of bad faith was proven. However, in breach of contract of carriage, moral damages may be recovered when it results in the death of a passenger. (Sulpicio Lines, Supra.) In breach of contract of carriage by air, moral damages are awarded only if the defendant acted fraudulently or in bad faith. (PAL v. Miano) Where the defendant airline is not shown to have acted fraudulently or in bad faith, liability for damages is limited to the natural and probable consequences of the breach of obligation which the parties had

Exceptions: An existing corporation with reputation to protect is entitled to moral damages, if the basis of the claim is either:

1. Its good reputation has been besmirched by the defendants (Art. 2217); and

2. If its complaint is for libel or any other form of defamation.


- � -17foreseen or could have foreseen at the time the contract was made. This being the case, it cannot contemplate moral and exemplary damages. (Tan v. Northwest Airlines) With respect to the award of moral damages, the general rule is that said damages are not recoverable in culpa contractual except when the presence of bad faith was proven. In breach of contract of carriage, moral damages may be recovered when it results in the death of a passenger. (Sulpicio v. CA and Tabuquilde) Requisites for award of moral damages: 1) There must be an injury, whether physical, mental or psychological, clearly sustained by the claimant; 2) There must be a culpable act or omission factually established; 3) The wrongful act/omission of the defendant is the proximate cause of the injury sustained by the claimant; and 4) The award of damages is predicated on any of the cases stated in Art. 2219 of the Civil Code (or Art. 2220). The award of moral damages is aimed at a restoration, within the limits of the possible, of the spiritual status quo ante: and, therefore, it must be proportionate to the suffering inflicted. The intensity of the pain experienced by the relatives of the victim is proportionate to the intensity of the affection for him and bears no relation whatever with the wealth or means of the offender. The death caused by a beggar is felt by the parents of the victim as intensely as that caused by the scion of a wealthy family. To recapitulate: compensatory and moral damages can only be awarded to indemnify the victim or his relatives for the prejudice suffered, and the financial standing of the person responsible is irrelevant to their evaluation. (PANTRANCO v. Legaspi) The well-entrenched principle is that the grant of moral damages depends upon the discretion of the court based on the circumstances of each case.16 This discretion is limited by the principle that the "amount awarded should not be palpably and scandalously excessive" as to indicate that it was the result of prejudice or corruption on the part of the trial court. Damages are not intended to enrich the complainant at the expense of the defendant. They are awarded only to alleviate the moral suffering that the injured party had undergone by reason of the defendant's culpable action. There is no hard-and-fast rule in the determination of what would be a fair amount of moral damages since each case must be governed by its own peculiar facts. (Singson v. CA) To sue for moral damages under breach of a contract of transportation, it must be proven that the common carrier acted in bad faith (in relation to the breach of contract, such that the bad faith attended the accident which resulted in the injury or death). (Fores v. Miranda) Moral damages are not recoverable in actions for damages predicated on a breach of contract of transportation, in view of the provisions of articles 2219 and 2220. The exceptions are

1. Where the mishap results in the death of a passenger; and 2. Where it is proved that the carrier was guilty of fraud or bad

faith, even if death does not result. (Philippine Rabbit v. Esguerra; China Airlines v. IAC)

In awarding moral damages as a result of death of a passenger, the heirs who are entitled to such are the spouse, legitimate and illegitimate descendants and ascendants of the deceased, as provided in Art. 2206, and such does not include collaterals (brothers, sisters, nephews, nieces. (Supicio v. Curso) What constitutes bad faith? Although the rule is that moral damages predicated upon a breach of contract of carriage may only be recoverable in instances where the mishap results in the death of a passenger, or where the carrier is guilty of fraud or bad faith, there are situations where the negligence of the carrier is so gross and reckless as to virtually amount to bad faith, in which case, the passenger likewise becomes entitled to recover moral damages. (Singson v. CA)

Under Art. 2220, in cases of breach of contract (including one of transportation or carriage), either fraud or bad faith, that is wanton and deliberately injurious conduct on the part of the carrier is necessary to justify an award for moral damages. If the carrier fails to cover the side of the bus, it was foreseeable that passengers might fall out of it during the transport. Failing to cover the side of the bus was clearly bad faith on their part (for failing to ensure the safety of passengers), thus allowing for moral damages to be awarded. (LTB v. Cornista) Gross negligence amount to bad faith and it will justify the award of moral damages in cases of breach of contract of carriage. (Armovit v CA) When an airline issues a ticket to a passenger confirmed on a particular flight, on a certain date, a contract of carriage arise, and the passenger has every right to expect that he would fly on that flight and on that date. If he does not, then the carrier opens itself to a suit for breach of contract of carriage. When an airline had deliberately overbooked, it took the risk of having to deprive some passengers of their seats in case some of them would show up for check in. for the indignity and inconvenience of being refused a confirmed seat on the last minute, said passenger is entitled to an award for moral damages. (Zalamea v. CA) Moral and exemplary damages may be awarded for breach of contract of carriage when the carrier acted in bad faith. Example, refusing to allow a passenger to board the plane despite having tickets confirmed twice, and discriminating against such passenger due to his race or color, and arrogantly threatening him. Inattention and lack of care for the interest of its passengers who are entitled to utmost consideration, particularly as to their convenience, amount to bad faith which entitles the passenger to an award for moral damages. (Trans World v. CA; Alitalia Airways v. CA) xxx Art. 2226. Liquidated damages are those agreed upon by the parties to a contract, to be paid in case of breach thereof. How is liquidated damages different from all other damages? It is imposed by a contract. It is stated in the contract and not by the law, as opposed to other damages. These are fixed, previously agreed upon by the parties in case of breach by the other. Purposes of liquidated damages: 1) Indemnity 2) Penalty as a deterrent How would you know that the damages function as an indemnity or as a deterrent? As Indemnity – the amount is the amount of loss suffered. The loss is equivalent to the amount of damages. It serves merely as compensation for the loss. The parties anticipate that the amount of indemnity to cover the loss is that stipulated. As deterrent – it exceeds the amount of the loss. The amount is set by the parties, which is higher than the indemnity, but not iniquitous or unconscionable. Effect of partial performance: If there was partial performance of the contract, the total amount of the liquidated damages agreed upon cannot be enforced. They are presumed to be only for total breach of contract. Hence, there can be a corresponding reduction of the liquidated damages. Example: If out of 500 TV sets agreed to be delivered, only 63 were actually delivered, equitable reduction of the liquidated damages is proper. Art. 2229. Exemplary or corrective damages are imposed, by way of example or correction for the public good, in addition to the moral, temperate, liquidated or compensatory damages. Punitive or Vindictive damages: Also known as “punitive” or “vindictive” damages, exemplary or corrective damages are intended to


- � -18serve as a deterrent to serious wrongdoings and as a vindication of undue sufferings and wanton invasion of an injured or punishment for those guilty of outrageous conduct. What is being punished is the attitude of the defendant. Exemplary damages are required by public policy, for wanton acts must be suppressed. They are an antidote so that the poison of wickedness may not run through the body politic. They are not imposed to enrich a party or impoverish another but to serve as a deterrent against or as a negative incentive to curb socially deleterious actions. Nature: Exemplary damages are mere accessories to other forms of damages except nominal damages. They are mere additions to actual, moral, temperate and liquidated damages which may or may not be granted at all depending upon the necessity of setting an example for the public good as a form of deterrent to the repetition of the same act by any one. Exemplary damages are imposed as a corrective measure when the guilty party has acted in a wanton, fraudulent, reckless, oppressive or malevolent manner. When can an employer be liable for exemplary damages for the acts of his employees? As a rule, an employer may not be held liable for exemplary damages for the negligence of his employees. Thus, our jurisprudence sets certain conditions when exemplary damages may be awarded, as follows: First: They may be imposed by way of example or correction only in addition, among others, to compensatory damages, and cannot be recovered as a matter of right, their determination depending upon the amount of compensatory damages that may be awarded to the claimant. Second: The claimant must first establish his right to moral, temperate, liquidated or compensatory damages. Third: The wrongful act must be accompanied by bad faith, and the award would be allowed only if the guilty party acted in a wanton, fraudulent, reckless, oppressive or malevolent manner. When the plaintiffs prayed for such other relief and remedies as may be availed of under the premises, in effect, the court was called upon to exercise and use its discretion to decide whether the imposition of punitive or exemplary damages can be impose, even if not expressly prayed for or pleaded in the complaint. (Marchan v. Mendoza) The amount of exemplary damages need not be pleaded in the complaint because such cannot be predetermined. One can merely ask that such be determined by the court as the evidence may warrant and be awarded at its discretion. (PAL v. CA) Art. 2232. In contracts and quasi-contracts, the court may award exemplary damages if the defendant acted in a wanton, fraudulent, reckless, oppressive, or malevolent manner. According to Art. 2232 of the NCC, in contracts and quasi-contracts the court may award exemplary damages if the defendant acted in wanton, fraudulent, reckless, oppressive or malevolent manner. (Davila, Supra) The award of moral and exemplary damages in the aggregate may not be the usual way of awarding such damages. However, there can be no question that the entitlement to moral damages having been established, exemplary damages may be awarded. And exemplary damages may be awarded even though not so expressly pleaded in the complaint or proved. (PAL v. CA) With respect to the award of exemplary damages, Article 2232 of the Civil Code of the Philippines gives the Court the discretion to grant said damages in breach of contract when the defendant acted in a wanton, fraudulent and reckless manner. (Sulpicio v. Tabuquilde)

Art. 2233. Exemplary damages cannot be recovered as a matter of right; the court will decide whether or not they should be adjudicated. With respect to the award of exemplary damages, Article 2232 of the Civil Code of the Philippines gives the Court the discretion to grant said damages in breach of contract when the defendant acted in a wanton, fraudulent and reckless manner. The Court will take judicial notice of the dreadful regularity with which grievous maritime disasters occur in our waters with massive loss of life. The bulk of our population is too poor to afford domestic air transportation. So it is that notwithstanding the frequent sinking of passenger in our waters, crowds of people continue to travel by sea. This Court is prepared to use the instruments given to it by the law for securing the ends of law and public policy. One of those instruments is the institution of exemplary damages; one of those ends, of special importance in an archipelagic state like the Philippines, is the safe and reliable carriage of people and goods by sea. (Sulpicio Lines, Supra.) 2232 of the Civil Code of the Philippines provides that, in contracts and quasi-contracts the court may award exemplary damages if the defendant acted in a "wanton, fraudulent, reckless, oppressive or malevolent manner." Moreover, under Article 2208 of the same Code, attorney's fees other than judicial costs may be awarded "when exemplary damages are awarded." (LTB v. Diasanta) Characteristics of exemplary damages:

1. They cannot be recovered as a matter of right and its determination is upon the discretion of the court.

2. The amount of exemplary damages need not be proved because they depend on the actual damages awarded.

3. If it does not have to be proved, then it need not be specifically alleged, since such depends on whether actual damages should be awarded. (Marchan, supra.)

To justify an award of exemplary damages, the common carrier must be in bad faith in breaching the contract of carriage. (China Airlines v. IAC) Owners of common carriers cannot be held liable for exemplary damages unless it is shown that it authorized or ratified the driver’s reckless driving which resulted in the breach of the contract of carriage. It should be the driver who is to be made liable for such damages. It is difficult to conceive how the defendant in a breach of contract case could be held to have acted in a wanton, fraudulent, reckless, oppressive or violent manner within the meaning of Article 2232 for something he did or did not do after the breach, which had no causal connection therewith. The law does not contemplate a vicarious liability on his part: the breach is his as party to the contract, and so if he is to be held liable at all for exemplary damages by reason of the wrongful act of his agent, it must be shown that he had previously authorized or knowingly ratified it thereafter, in effect making him a co-participant… The mere statement that the defendant failed, even refused, to placate the suffering of the plaintiff, necessitating the filing of the action, is too tenuous a basis to warrant the conclusion that the defendant approved of the wrongful act of his servant with full knowledge of the facts. It is not enough to say that an example should be made, or corrective measures employed, for the public good, especially in accident cases where public carriers are involved. For the causative negligence in such cases is personal to the employees actually in charge of the vehicles, and it is they who should be made to pay this kind of damages by way of example or correction, unless by the demonstrated tolerance or approval of the owners they themselves can be held at fault and their fault is of the character described in Article 2232 of the Civil Code. Otherwise there would be practically no difference between their liability for exemplary damages and their liability for compensatory damages, which needs no proof of their negligence since the suit is predicated on breach of contract and due diligence on their part does not constitute a defense. (Munsayac v. De Lara; Sarkies Tours v. IAC) This is in opposition to the case of R Transport v. Pante where the reckless driving of the driver of the vehicle was attributed to be reckless behavior of the common carrier, making the latter liable for exemplary damages. But, the court did say that award of exemplary damages is


- � -19justified to serve as an example or as a correction for the public good. Also, in Philippine Hawk v Tan Lee, (which is an action based on tort) whenever an employee’s negligence causes damage or injury to another, there instantly arises a presumption that the employer failed to exercise the due diligence of a good father of the family in the selection or supervision of its employees. To avoid liability for a quasi-delict committed by his employee, an employer must overcome the presumption by presenting convincing proof that he exercised the care and diligence of a good father of a family in the selection and supervision of his employee. Such is not the case when the action is one based on breach of contract. Art. 2234. While the amount of the exemplary damages need not be proved, the plaintiff must show that he is entitled to moral, temperate or compensatory damages before the court may consider the question of whether or not exemplary damages should be awarded. In case liquidated damages have been agreed upon, although no proof of loss is necessary in order that such liquidated damages may be recovered, nevertheless, before the court may consider the question of granting exemplary in addition to the liquidated damages, the plaintiff must show that he would be entitled to moral, temperate or compensatory damages were it not for the stipulation for liquidated damages. Art. 2235. A stipulation whereby exemplary damages are renounced in advance shall be null and void. Conditions for the grant of exemplary damages: 1) Exemplary damages are merely accessory damages as an addition to actual, moral, or temperate damages. 2) Such grant cannot be claimed as a matter of right, and is discretionary to the court. 3) While the court has discretion to grant it, it is required that the aggrieved party must establish by evidence that he is entitled to compensatory, moral or temperate damages. 4) In case of crimes, there must be at least one aggravating circumstance. 5) In quasi-delict, the defendant must be proved to be grossly negligent. 6) In contracts and quasi-contracts, the defendant must be proved to have acted in a wanton, fraudulent, reckless, oppressive, or malevolent manner. As a general rule, a party cannot impugn the correctness of a judgment not appealed by a party. However, the court in its discretion may still afford the parties equitable reliefs as may be proper considering the circumstances. (De Lima, Supra) In Sum: Damages which may be recovered for breach of contract of carriage:

1. Actual damages 2. Exemplary damages 3. Moral Damages 4. Liquidated damages – in lieu of actual damages if agreed

upon in the contract.

Convention for the Unification of Certain Rules for International

Carriage by Air (Montreal, 28 May 1999) THE STATES PARTIES TO THIS CONVENTION RECOGNIZING the significant contribution of the Convention for the Unification of Certain Rules relating to International Carriage by Air signed in Warsaw on 12 October 1929, hereinafter referred to as the "Warsaw Convention", and other related instruments to the harmonization of private international air law; RECOGNIZING the need to modernize and consolidate the Warsaw Convention and related instruments; RECOGNIZING the importance of ensuring protection of the interests of consumers in international carriage by air and the need for equitable compensation based on the principle of restitution; REAFFIRMING the desirability of an orderly development of international air transport operations and the smooth flow of passengers, baggage and cargo in accordance with the principles and objectives of the Convention on International Civil Aviation, done at Chicago on 7 December 1944; CONVINCED that collective State action for further harmonization and codification of certain rules governing international carriage by air through a new Convention is the most adequate means of achieving an equitable balance of interests; HAVE AGREED AS FOLLOWS:

Chapter 1 - General Provisions Article 1 - Scope of application

1. This Convention applies to all international carriage of persons, baggage or cargo performed by aircraft for reward. It applies equally to gratuitous carriage by aircraft performed by an air transport undertaking. 2. For the purposes of this Convention, the expression "international carriage" means any carriage in which, according to the agreement between the parties, the place of departure and the place of destination, whether or not there be a break in the carriage or a transhipment, are situated either within the territories of two States Parties, or within the territory of a single State Party if there is an agreed stopping place within the territory of another State, even if that State is not a State Party. Carriage between two points within the territory of a single State Party without an agreed stopping place within the territory of another State is not international carriage for the purposes of this Convention. 3. Carriage to be performed by several successive carriers is deemed, for the purposes of this Convention, to be one undivided carriage if it has been regarded by the parties as a single operation, whether it had been agreed upon under the form of a single contract or of a series of contracts, and it does not lose its international character merely because one contract or a series of contracts is to be performed entirely within the territory of the same State. 4. This Convention applies also to carriage as set out in Chapter V, subject to the terms contained therein.

Article 2 - Carriage performed by State and carriage of postal items

1. This Convention applies to carriage performed by the State or by legally constituted public bodies provided it falls within the conditions laid down in Article 1. 2. In the carriage of postal items, the carrier shall be liable only to the relevant postal administration in accordance with the rules


- � -20applicable to the relationship between the carriers and the postal administrations. 3. Except as provided in paragraph 2 of this Article, the provisions of this Convention shall not apply to the carriage of postal items. Chapter II - Documentation and Duties of the Parties Relating to the Carriage of Passengers, Baggage and Cargo

Article 3 - Passengers and baggage 1. In respect of carriage of passengers, an individual or collective document of carriage shall be delivered containing: (a) an indication of the places of departure and destination; (b) if the places of departure and destination are within the territory of a single State Party, one or more agreed stopping places being within the territory of another State, an indication of at least one such stopping place. 2. Any other means which preserves the information indicated in paragraph 1 may be substituted for the delivery of the document referred to in that paragraph. If any such other means is used, the carrier shall offer to deliver to the passenger a written statement of the information so preserved. 3. The carrier shall deliver to the passenger a baggage identification tag for each piece of checked baggage. 4. The passenger shall be given written notice to the effect that where this Convention is applicable it governs and may limit the liability of carriers in respect of death or injury and for destruction or loss of, or damage to, baggage, and for delay. 5. Non-compliance with the provisions of the foregoing paragraphs shall not affect the existence or the validity of the contract of carriage, which shall, nonetheless, be subject to the rules of this Convention including those relating to limitation of liability.

Article 4 - Cargo 1. In respect of the carriage of cargo, an air waybill shall be delivered. 2. Any other means which preserves a record of the carriage to be performed may be substituted for the delivery of an air waybill. If such other means are used, the carrier shall, if so requested by the consignor, deliver to the consignor a cargo receipt permitting identification of the consignment and access to the information contained in the record preserved by such other means.

Article 5 - Contents of air waybill or cargo receipt The air waybill or the cargo receipt shall include: (a) an indication of the places of departure and destination; (b) if the places of departure and destination are within the territory of a single State Party, one or more agreed stopping places being within the territory of another State, an indication of at least one such stopping place; and (c) an indication of the weight of the consignment.

Article 6 - Document relating to the nature of the cargo The consignor may be required, if necessary, to meet the formalities of customs, police and similar public authorities to deliver a document indicating the nature of the cargo. This provision creates for the carrier no duty, obligation or liability resulting therefrom.

Article 7 - Description of air waybill 1. The air waybill shall be made out by the consignor in three original parts. 2. The first part shall be marked "for the carrier"; it shall be signed by the consignor. The second part shall be marked "for the consignee"; it shall be signed by the consignor and by the carrier.

The third part shall be signed by the carrier who shall hand it to the consignor after the cargo has been accepted. 3. The signature of the carrier and that of the consignor may be printed or stamped. 4. If, at the request of the consignor, the carrier makes out the air waybill, the carrier shall be deemed, subject to proof to the contrary, to have done so on behalf of the consignor.

Article 8 - Documentation for multiple packages When there is more than one package: (a) the carrier of cargo has the right to require the consignor to make out separate air waybills; (b) the consignor has the right to require the carrier to deliver separate cargo receipts when the other means referred to in paragraph 2 of Article 4 are used.

Article 9 - Non-compliance with documentary requirements Non-compliance with the provisions of Articles 4 to 8 shall not affect the existence or the validity of the contract of carriage, which shall, nonetheless, be subject to the rules of this Convention including those relating to limitation of liability.

Article 10 - Responsibility for particulars of documentation 1. The consignor is responsible for the correctness of the particulars and statements relating to the cargo inserted by it or on its behalf in the air waybill or furnished by it or on its behalf to the carrier for insertion in the cargo receipt or for insertion in the record preserved by the other means referred to in paragraph 2 of Article 4. The foregoing shall also apply where the person acting on behalf of the consignor is also the agent of the carrier. 2. The consignor shall indemnify the carrier against all damage suffered by it, or by any other person to whom the carrier is liable, by reason of the irregularity, incorrectness or incompleteness of the particulars and statements furnished by the consignor or on its behalf. 3. Subject to the provisions of paragraphs 1 and 2 of this Article, the carrier shall indemnify the consignor against all damage suffered by it, or by any other person to whom the consignor is liable, by reason of the irregularity, incorrectness or incompleteness of the particulars and statements inserted by the carrier or on its behalf in the cargo receipt or in the record preserved by the other means referred to in paragraph 2 of Article 4.

Article 11 - Evidentiary value of documentation 1. The air waybill or the cargo receipt is prima facie evidence of the conclusion of the contract, of the acceptance of the cargo and of the conditions of carriage mentioned therein. 2. Any statements in the air waybill or the cargo receipt relating to the weight, dimensions and packing of the cargo, as well as those relating to the number of packages, are prima facie evidence of the facts stated; those relating to the quantity, volume and condition of the cargo do not constitute evidence against the carrier except so far as they both have been, and are stated in the air waybill or the cargo receipt to have been, checked by it in the presence of the consignor, or relate to the apparent condition of the cargo.

Article 12 - Right of disposition of cargo 1. Subject to its liability to carry out all its obligations under the contract of carriage, the consignor has the right to dispose of the cargo by withdrawing it at the airport of departure or destination, or by stopping it in the course of the journey on any landing, or by calling for it to be delivered at the place of destination or in the course of the journey to a person other than the consignee originally designated, or by requiring it to be returned to the airport of departure. The consignor must not exercise this right of disposition in such a way as to prejudice the carrier or other


- � -21consignors and must reimburse any expenses occasioned by the exercise of this right. 2. If it is impossible to carry out the instructions of the consignor, the carrier must so inform the consignor forthwith. 3. If the carrier carries out the instructions of the consignor for the disposition of the cargo without requiring the production of the part of the air waybill or the cargo receipt delivered to the latter, the carrier will be liable, without prejudice to its right of recovery from the consignor, for any damage which may be caused thereby to any person who is lawfully in possession of that part of the air waybill or the cargo receipt. 4. The right conferred on the consignor ceases at the moment when that of the consignee begins in accordance with Article 13. Nevertheless, if the consignee declines to accept the cargo, or cannot be communicated with, the consignor resumes its right of disposition.

Article 13 - Delivery of the cargo 1. Except when the consignor has exercised its right under Article 12, the consignee is entitled, on arrival of the cargo at the place of destination, to require the carrier to deliver the cargo to it, on payment of the charges due and on complying with the conditions of carriage. 2. Unless it is otherwise agreed, it is the duty of the carrier to give notice to the consignee as soon as the cargo arrives. 3. If the carrier admits the loss of the cargo, or if the cargo has not arrived at the expiration of seven days after the date on which it ought to have arrived, the consignee is entitled to enforce against the carrier the rights which flow from the contract of carriage. Article 14 - Enforcement of the rights of consignor and consignee

The consignor and the consignee can respectively enforce all the rights given to them by Articles 12 and 13, each in its own name, whether it is acting in its own interest or in the interest of another, provided that it carries out the obligations imposed by the contract of carriage.

Article 15 - Relations of consignor and consignee or mutual relations of third parties

1. Articles 12, 13 and 14 do not affect either the relations of the consignor and the consignee with each other or the mutual relations of third parties whose rights are derived either from the consignor or from the consignee. 2. The provisions of Articles 12, 13 and 14 can only be varied by express provision in the air waybill or the cargo receipt.

Article 16 - Formalities of customs, police or other public authorities

1. The consignor must furnish such information and such documents as are necessary to meet the formalities of customs, police and any other public authorities before the cargo can be delivered to the consignee. The consignor is liable to the carrier for any damage occasioned by the absence, insufficiency or irregularity of any such information or documents, unless the damage is due to the fault of the carrier, its servants or agents. 2. The carrier is under no obligation to enquire into the correctness or sufficiency of such information or documents. Chapter III - Liability of the Carrier and Extent of Compensation for Damage

Article 17 - Death and injury of passengers - damage to baggage 1. The carrier is liable for damage sustained in case of death or bodily injury of a passenger upon condition only that the accident which caused the death or injury took place on board the aircraft or in the course of any of the operations of embarking or disembarking.

2. The carrier liable for damage sustained in case of destruction or loss of, or of damage to, checked baggage upon condition only that the event which caused the destruction, loss or damage took place on board the aircraft or during any period within which the checked baggage was in the charge of the carrier. However, the carrier is not liable if and to the extent that the damage resulted from the inherent defect, quality or vice of the baggage. In the case of unchecked baggage, including personal items, the carrier is liable if the damage resulted from its fault or that of its servants or agents. 3. If the carrier admits the loss of the checked baggage, or if the checked baggage has not arrived at the expiration of twenty-one days after the date on which it ought to have arrived, the passenger is entitled to enforce against the carrier the rights which flow from the contract of carriage. 4. Unless otherwise specified, in this Convention the term "baggage" means both checked baggage and unchecked baggage.

Article 18 - Damage to cargo 1. The carrier is liable for damage sustained in the event of the destruction or loss of or damage to, cargo upon condition only that the event which caused the damage so sustained took place during the carriage by air. 2. However, the carrier is not liable if and to the extent it proves that the destruction, or loss of, or damage to, the cargo resulted from one or more of the following: (a) inherent defect, quality or vice of that cargo; (b) defective packing of that cargo performed by a person other than the carrier or its servants or agents; (c) an act of war or an armed conflict; (d) an act of public authority carried out in connection with the entry, exit or transit of the cargo. 3. The carriage by air within the meaning of paragraph 1 of this Article comprises the period during which the cargo is in the charge of the carrier. 4. The period of the carriage by air does not extend to any carriage by land, by sea or by inland waterway performed outside an airport. If, however, such carriage takes place in the performance of a contract for carriage by air, for the purpose of loading, delivery or transhipment, any damage is presumed, subject to proof to the contrary, to have been the result of an event which took place during the carriage by air. If a carrier, without the consent of the consignor, substitutes carriage by another mode of transport for the whole or part of a carriage intended by the agreement between the parties to be carriage by air, such carriage by another mode of transport is deemed to be within the period of carriage by air.

Article 19 - Delay The carrier is liable for damage occasioned by delay in the carriage by air of passengers, baggage or cargo. Nevertheless, the carrier shall not be liable for damage occasioned by delay if it proves that it and its servants and agents took all measures that could reasonably be required to avoid the damage or that it was impossible for it or them to take such measures.

Article 20 - Exoneration If the carrier proves that the damage was caused or contributed to by the negligence or other wrongful act or omission of the person claiming compensation, or the person from whom he or she derives his or her rights, the carrier shall be wholly or partly exonerated from its liability to the claimant to the extent that such negligence or wrongful act or omission caused or contributed to the damage. When by reason of death or injury of a passenger compensation is claimed by a person other than the passenger, the carrier shall likewise be wholly or partly exonerated from its liability to the extent that it proves that the damage was caused or


- � -22contributed to by the negligence or other wrongful act or omission of that passenger. This Article applies to all the liability provisions in this Convention, including paragraph 1 of Article 21. Article 21 - Compensation in case of death or injury of passengers 1. For damages arising under paragraph 1 of Article 17 not exceeding 100,000 Special Drawing Rights for each passenger, the carrier shall not be able to exclude or limit its liability. 2. The carrier shall not be liable for damages arising under paragraph 1 of Article 17 to the extent that they exceed for each passenger 100,000 Special Drawing Rights if the carrier proves that: (a) such damage was not due to the negligence or other wrongful act or omission of the carrier or its servants or agents; or (b) such damage was solely due to the negligence or other wrongful act or omission of a third party.

Article 22 - Limits of liability in relation to delay, baggage and cargo

1. In the case of damage caused by delay as specified in Article 19 in the carriage of persons, the liability of the carrier for each passenger is limited to 4,150 Special Drawing Rights. 2. In the carriage of baggage, the liability of the carrier in the case of destruction, loss, damage or delay is limited to 1,000 Special Drawing Rights for each passenger unless the passenger has made, at the time when the checked baggage was handed over to the carrier, a special declaration of interest in delivery at destination and has paid a supplementary sum if the case so requires. In that case the carrier will be liable to pay a sum not exceeding the declared sum, unless it proves that the sum is greater than the passenger's actual interest in delivery at destination. 3. In the carriage of cargo, the liability of the carrier in the case of destruction, loss, damage or delay is limited to a sum of 17 Special Drawing Rights per kilogram, unless the consignor has made, at the time when the package was handed over to the carrier, a special declaration of interest in delivery at destination and has paid a supplementary sum if the case so requires. In that case the carrier will be liable to pay a sum not exceeding the declared sum, unless it proves that the sum is greater than the consignor's actual interest in delivery at destination. 4. In the case of destruction, loss, damage or delay of part of the cargo, or of any object contained therein, the weight to be taken into consideration in determining the amount to which the carrier's liability is limited shall be only the total weight of the package or packages concerned. Nevertheless, when the destruction, loss, damage or delay of a part of the cargo, or of an object contained therein, affects the value of other packages covered by the same air waybill, or the same receipt or, if they were not issued, by the same record preserved by the other means referred to in paragraph 2 of Article 4, the total weight of such package or packages shall also be taken into consideration in determining the limit of liability. 5. The foregoing provisions of paragraphs 1 and 2 of this Article shall not apply if it is proved that the damage resulted from an act or omission of the carrier, its servants or agents, done with intent to cause damage or recklessly and with knowledge that damage would probably result; provided that, in the case of such act or omission of a servant or agent, it is also proved that such servant or agent was acting within the scope of its employment. 6. The limits prescribed in Article 21 and in this Article shall not prevent the court from awarding, in accordance with its own law, in addition, the whole or part of the court costs and of the other expenses of the litigation incurred by the plaintiff, including interest. The foregoing provision shall not apply if the amount of the damages awarded, excluding court costs and other expenses

of the litigation, does not exceed the sum which the carrier has offered in writing to the plaintiff within a period of six months from the date of the occurrence causing the damage, or before the commencement of the action, if that is later.

Article 23 - Conversion of monetary units 1. The sums mentioned in terms of Special Drawing Right in this Convention shall be deemed to refer to the Special Drawing Right as defined by the International Monetary Fund. Conversion of the sums into national currencies shall, in case of judicial proceedings, be made according to the value of such currencies in terms of the Special Drawing Right at the date of the judgement. The value of a national currency, in terms of the Special Drawing Right, of a State Party which is a Member of the International Monetary Fund, shall be calculated in accordance with the method of valuation applied by the International Monetary Fund, in effect at the date of the judgement, for its operations and transactions. The value of a national currency, in terms of the Special Drawing Right, of a State Party which is not a Member of the International Monetary Fund, shall be calculated in a manner determined by that State. 2. Nevertheless, those States which are not Members of the International Monetary Fund and whose law does not permit the application of the provisions of paragraph 1 of this Article may, at the time of ratification or accession or at any time thereafter, declare that the limit of liability of the carrier prescribed in Article 21 is fixed at a sum of 1,500,000 monetary units per passenger in judicial proceedings in their territories; 62,500 monetary units per passenger with respect to paragraph 1 of Article 22; 15,000 monetary units per passenger with respect to paragraph 2 of Article 22; and 250 monetary units per kilogram with respect to paragraph 3 of Article 22. This monetary unit corresponds to sixty-five and a half milligrams of gold of millesimal fineness nine hundred. These sums may be converted into the national currency concerned in round figures. The conversion of these sums into national currency shall be made according to the law of the State concerned. 3. The calculation mentioned in the last sentence of paragraph I of this Article and the conversion method mentioned in paragraph 2 of this Article shall be made in such manner as to express in the national currency of the State Party as far as possible the same real value for the amounts in Articles 21 and 22 as would result from the application of the first three sentences of paragraph 1 of this Article. States Parties shall communicate to the depositary the manner of calculation pursuant to paragraph 1 of this Article, or the result of the conversion in paragraph 2 of this Article as the case may be, when depositing an instrument of ratification, acceptance, approval of or accession to this Convention and whenever there is a change in either.

Article 24 - Review of limits 1. Without prejudice to the provisions of Article 25 of this Convention and subject to paragraph 2 below, the limits of liability prescribed in Articles 21, 22 and 23 shall be reviewed by the Depositary at five-year intervals, the first such review to take place at the end of the fifth year following the date of entry into force of this Convention, or if the Convention does not enter into force within five years of the date it is first open for signature, within the first year of its entry into force, by reference to an inflation factor which corresponds to the accumulated rate of inflation since the previous revision or in the first instance since the date of entry into force of the Convention. The measure of the rate of inflation to be used in determining the inflation factor shall be the weighted average of the annual rates of increase or decrease in the Consumer Price Indices of the States whose currencies comprise the Special Drawing Right mentioned in paragraph 1 of Article 23. 2. If the review referred to in the preceding paragraph concludes that the inflation factor has exceeded 10 percent, the Depositary shall notify States Parties of a revision of the limits of liability. Any such revision shall become effective six months after its


- � -23notification to the States Parties. If within three months after its notification to the States Parties a majority of the States Parties register their disapproval, the revision shall not become effective and the Depositary shall refer the matter to a meeting of the States Parties. The Depositary shall immediately notify all States Parties of the coming into force of any revision. 3. Notwithstanding paragraph 1 of this Article, the procedure referred to in paragraph 2 of this Article shall be applied at any time provided that one-third of the States Parties express a desire to that effect and upon condition that the inflation factor referred to in paragraph 1 has exceeded 30 percent since the previous revision or since the date of entry into force of this Convention if there has been no previous revision. Subsequent reviews using the procedure described in paragraph 1 of this Article will take place at five-year intervals starting at the end of the fifth year following the date of the reviews under the present paragraph.

Article 25 - Stipulation on limits A carrier may stipulate that the contract of carriage shall be subject to higher limits of liability than those provided for in this Convention or to no limits of liability whatsoever.

Article 26 - Invalidity of contractual provisions Any provision tending to relieve the carrier of liability or to fix a lower limit than that which is laid down in this Convention shall be null and void, but the nullity of any such provision does not involve the nullity of the whole contract, which shall remain subject to the provisions of this Convention.

Article 27 - Freedom to contract Nothing contained in this Convention shall prevent the carrier from refusing to enter into any contract of carriage, from waiving any defences available under the Convention, or from laying down conditions which do not conflict with the provisions of this Convention.

Article 28 - Advance payments In the case of aircraft accidents resulting in death or injury of passengers, the carrier shall, if required by its national law, make advance payments without delay to a natural person or persons who are entitled to claim compensation in order to meet the immediate economic needs of such persons. Such advance payments shall not constitute a recognition of liability and may be offset against any amounts subsequently paid as damages by the carrier.

Article 29 - Basis of claims In the carriage of passengers, baggage and cargo, any action for damages, however founded, whether under this Convention or in contract or in tort or otherwise, can only be brought subject to the conditions and such limits of liability as are set out in this Convention without prejudice to the question as to who are the persons who have the right to bring suit and what are their respective rights. In any such action, punitive, exemplary or any other non-compensatory damages shall not be recoverable.

Article 30 - Servants, agents - aggregation of claims 1. If an action is brought against a servant or agent of the carrier arising out of damage to which the Convention relates, such servant or agent, if they prove that they acted within the scope of their employment, shall be entitled to avail themselves of the conditions and limits of liability which the carrier itself is entitled to invoke under this Convention. 2. The aggregate of the amounts recoverable from the carrier, its servants and agents, in that case, shall not exceed the said limits. 3. Save in respect of the carriage of cargo, the provisions of paragraphs 1 and 2 of this Article shall not apply if it is proved that the damage resulted from an act or omission of the servant or agent done with intent to cause damage or recklessly and with knowledge that damage would probably result.

Article 31 - Timely notice of complaints

1. Receipt by the person entitled to delivery of checked baggage or cargo without complaint is prima facie evidence that the same has been delivered in good condition and in accordance with the document of carriage or with the record preserved by the other means referred to in paragraph 2 of Article 3 and paragraph 2 of Article 4. 2. In the case of damage, the person entitled to delivery must complain to the carrier forthwith after the discovery of the damage, and, at the latest, within seven days from the date of receipt in the case of checked baggage and fourteen days from the date of receipt in the case of cargo. In the case of delay, the complaint must be made at the latest within twenty-one days from the date on which the baggage or cargo have been placed at his or her disposal. 3. Every complaint must be made in writing and given or dispatched within the times aforesaid. 4. If no complaint is made within the times aforesaid, no action shall lie against the carrier, save in the case of fraud on its part.

Article 32 - Death of person liable In the case of the death of the person liable, an action for damages lies in accordance with the terms of this Convention against those legally representing his or her estate.

Article 33 - Jurisdiction 1. An action for damages must be brought, at the option of the plaintiff, in the territory of one of the States Parties, either before the court of the domicile of the carrier or of its principal place of business, or where it has a place of business through which the contract has been made or before the court at the place of destination. 2. In respect of damage resulting from the death or injury of a passenger, an action may be brought before one of the courts mentioned in paragraph 1 of this Article, or in the territory of a State Party in which at the time of the accident the passenger has his or her principal and permanent residence and to or from which the carrier operates services for the carriage of passengers by air, either on its own aircraft or on another carrier's aircraft pursuant to a commercial agreement, and in which that carrier conducts its business of carriage of passengers by air from premises leased or owned by the carrier itself or by another carrier with which it has a commercial agreement. 3. For the purposes of paragraph 2, (a) "commercial agreement" means an agreement, other than an agency agreement, made between carriers and relating to the provision of their joint services for carriage of passengers by air; (b) "principal and permanent residence" means the one fixed and permanent abode of the passenger at the time of the accident. The nationality of the passenger shall not be the determining factor in this regard. 4. Questions of procedure shall be governed by the law of the court seized of the case.

Article 34 - Arbitration 1. Subject to the provisions of this Article, the parties to the contract of carriage for cargo may stipulate that any dispute relating to the liability of the carrier under this Convention shall be settled by arbitration. Such agreement shall be in writing. 2. The arbitration proceedings shall, at the option of the claimant, take place within one of the jurisdictions referred to in Article 33. 3. The arbitrator or arbitration tribunal shall apply the provisions of this Convention.


- � -244. The provisions of paragraphs 2 and 3 of this Article shall be deemed to be part of every arbitration clause or agreement, and any term of such clause or agreement which is inconsistent therewith shall be null and void.

Article 35 - Limitation of actions 1. The right to damages shall be extinguished if an action is not brought within a period of two years, reckoned from the date of arrival at the destination, or from the date on which the aircraft ought to have arrived, or from the date on which the carriage stopped. 2. The method of calculating that period shall be determined by the law of the court seized of the case.

Article 36 - Successive carriage 1. In the case of carriage to be performed by various successive carriers and falling within the definition set out in paragraph 3 of Article 1, each carrier which accepts passengers, baggage or cargo is subject to the rules set out in this Convention and is deemed to be one of the parties to the contract of carriage in so far as the contract deals with that part of the carriage which is performed under its supervision. 2. In the case of carriage of this nature, the passenger or any person entitled to compensation in respect of him or her can take action only against the carrier which performed the carriage during which the accident or the delay occurred, save in the case where, by express agreement, the first carrier has assumed liability for the whole journey. 3. As regards baggage or cargo, the passenger or consignor will have a right of action against the first carrier, and the passenger or consignee who is entitled to delivery will have a right of action against the last carrier, and further, each may take action against the carrier which performed the carriage during which the destruction, loss, damage or delay took place. These carriers will be jointly and severally liable to the passenger or to the consignor or consignee.

Article 37 - Right of recourse against third parties Nothing in this Convention shall prejudice the question whether a person liable for damage in accordance with its provisions has a right of recourse against any other person.

Chapter IV - Combined Carriage Article 38 - Combined carriage

1. In the case of combined carriage performed partly by air and partly by any other mode of carriage, the provisions of this Convention shall, subject to paragraph 4 of Article 18, apply only to the carriage by air, provided that the carriage by air falls within the terms of Article 1. 2. Nothing in this Convention shall prevent the parties in the case of combined carriage from inserting in the document of air carriage conditions relating to other modes of carriage, provided that the provisions of this Convention are observed as regards the carriage by air. Chapter V - Carriage by Air Performed by a Person other than the

Contracting Carrier Article 39 - Contracting carrier - actual carrier

The provisions of this Chapter apply when a person (hereinafter referred to as "the contracting carrier") as a principal makes a contract of carriage governed by this Convention with a passenger or consignor or with a person acting on behalf of the passenger or consignor, and another person (hereinafter referred to as "the actual carrier") performs, by virtue of authority from the contracting carrier, the whole or part of the carriage, but is not with respect to such part a successive carrier within the meaning of this Convention. Such authority shall be presumed in the absence of proof to the contrary.

Article 40 - Respective liability of contracting and actual carriers

If an actual carrier performs the whole or part of carriage which, according to the contract referred to in Article 39, is governed by this Convention, both the contracting carrier and the actual carrier shall, except as otherwise provided in this Chapter, be subject to the rules of this Convention, the former for the whole of the carriage contemplated in the contract, the latter solely for the carriage which it performs.

Article 41 - Mutual liability 1. The acts and omissions of the actual carrier and of its servants and agents acting within the scope of their employment shall, in relation to the carriage performed by the actual carrier, be deemed to be also those of the contracting carrier. 2. The acts and omissions of the contracting carrier and of its servants and agents acting within the scope of their employment shall, in relation to the carriage performed by the actual carrier, be deemed to be also those of the actual carrier. Nevertheless, no such act or omission shall subject the actual carrier to liability exceeding the amounts referred to in Articles 21, 22, 23 and 24. Any special agreement under which the contracting carrier assumes obligations not imposed by this Convention or any waiver of rights or defences conferred by this Convention or any special declaration of interest in delivery at destination contemplated in Article 22 shall not affect the actual carrier unless agreed to by it.

Article 42 - Addressee of complaints and instructions Any complaint to be made or instruction to be given under this Convention to the carrier shall have the same effect whether addressed to the contracting carrier or to the actual carrier. Nevertheless, instructions referred to in Article 12 shall only be effective if addressed to the contracting carrier.

Article 43 - Servants and agents In relation to the carriage performed by the actual carrier, any servant or agent of that carrier or of the contracting carrier shall, if they prove that they acted within the scope of their employment, be entitled to avail themselves of the conditions and limits of liability which are applicable under this Convention to the carrier whose servant or agent they are, unless it is proved that they acted in a manner that prevents the limits of liability from being invoked in accordance with this Convention.

Article 44 - Aggregation of damages In relation to the carriage performed by the actual carrier, the aggregate of the amounts recoverable from that carrier and the contracting carrier, and from their servants and agents acting within the scope of their employment, shall not exceed the highest amount which could be awarded against either the contracting carrier or the actual carrier under this Convention, but none of the persons mentioned shall be liable for a sum in excess of the limit applicable to that person.

Article 45 - Addressee of claims In relation to the carriage performed by the actual carrier, an action for damages may be brought, at the option of the plaintiff, against that carrier or the contracting carrier, or against both together or separately. If the action is brought against only one of those carriers, that carrier shall have the right to require the other carrier to be joined in the proceedings, the procedure and effects being governed by the law of the court seized of the case.

Article 46 - Additional jurisdiction Any action for damages contemplated in Article 45 must be brought, at the option of the plaintiff, in the territory of one of the States Parties, either before a court in which an action may be brought against the contracting carrier, as provided in Article 33, or before the court having jurisdiction at the place where the actual carrier has its domicile or its principal place of business.

Article 47 - Invalidity of contractual provisions


- � -25Any contractual provision tending to relieve the contracting carrier or the actual carrier of liability under this Chapter or to fix a lower limit than that which is applicable according to this Chapter shall be null and void, but the nullity of any such provision does not involve the nullity of the whole contract, which shall remain subject to the provisions of this Chapter.

Article 48 - Mutual relations of contracting and actual carriers Except as provided in Article 45, nothing in this Chapter shall affect the rights and obligations of the carriers between themselves, including any right of recourse or indemnification.

Chapter VI - Other Provisions Article 49 - Mandatory application

Any clause contained in the contract of carriage and all special agreements entered into before the damage occurred by which the parties purport to infringe the rules laid down by this Convention, whether by deciding the law to be applied, or by altering the rules as to jurisdiction, shall be null and void.

Article 50 - Insurance States Parties shall require their carriers to maintain adequate insurance covering their liability under this Convention. A carrier may be required by the State Party into which it operates to furnish evidence that it maintains adequate insurance covering its liability under this Convention.

Article 51 - Carriage performed in extraordinary circumstances The provisions of Articles 3 to 5, 7 and 8 relating to the documentation of carriage shall not apply in the case of carriage performed in extraordinary circumstances outside the normal scope of a carrier's business.

Article 52 - Definition of days The expression "days" when used in this Convention means calendar days, not working days.

Chapter VII - Final Clauses Article 53 - Signature, ratification and entry into force

1. This Convention shall be open for signature in Montreal on 28 May 1999 by States participating in the International Conference on Air Law held at Montreal from 10 to 28 May 1999. After 28 May 1999, the Convention shall be open to all States for signature at the headquarters of the International Civil Aviation Organization in Montreal until it enters into force in accordance with paragraph 6 of this Article. 2. This Convention shall similarly be open for signature by Regional Economic Integration Organisations. For the purpose of this Convention, a "Regional Economic Integration Organisation" means any organisation which is constituted by sovereign States of a given region which has competence in respect of certain matters governed by this Convention and has been duly authorized to sign and to ratify, accept, approve or accede to this Convention. A reference to a "State Party" or "States Parties" in this Convention, otherwise than in paragraph 2 of Article 1, paragraph 1(b) of Article 3, paragraph (b) of Article 5, Articles 23, 33, 46 and paragraph (b) of Article 57, applies equally to a Regional Economic Integration Organisation. For the purpose of Article 24, the references to "a majority of the States Parties" and "one-third of the States Parties" shall not apply to a Regional Economic Integration Organisation. 3. This Convention shall be subject to ratification by States and by Regional Economic Integration Organisations which have signed it. 4. Any State or Regional Economic Integration Organisation which does not sign this Convention may accept, approve or accede to it at any time.

5. Instruments of ratification, acceptance, approval or accession shall be deposited with the International Civil Aviation Organization, which is hereby designated the Depositary. 6. This Convention shall enter into force on the sixtieth day following the date of deposit of the thirtieth instrument of ratification, acceptance, approval or accession with the Depositary between the States which have deposited such instrument. An instrument deposited by a Regional Economic Integration Organisation shall not be counted for the purpose of this paragraph. 7. For other States and for other Regional Economic Integration Organisations, this Convention shall take effect sixty days following the date of deposit of the instrument of ratification, acceptance, approval or accession. 8. The Depositary shall promptly notify all signatories and States Parties of: (a) each signature of this Convention and date thereof; (b) each deposit of an instrument of ratification, acceptance, approval or accession and date thereof; (c) the date of entry into force of this Convention; (d) the date of the coming into force of any revision of the limits of liability established under this Convention; (e) any denunciation under Article 54.

Article 54 - Denunciation 1. Any State Party may denounce this Convention by written notification to the Depositary. 2. Denunciation shall take effect one hundred and eighty days following the date on which notification is received by the Depositary.

Article 55 - Relationship with other Warsaw Convention instruments

This Convention shall prevail over any rules which apply to international carriage by air: 1. between States Parties to this Convention by virtue of those States commonly being Party to (a) the Convention for the Unification of Certain Rules relating to International Carriage by Air signed at Warsaw on 12 October 1929 (hereinafter called the Warsaw Convention); (b) the Protocol to amend the Convention for the Unification of Certain Rules relating to International Carriage by Air signed at Warsaw on 12 October 1929, done at The Hague on 28 September 1955 (hereinafter called The Hague Protocol); (c) the Convention, Supplementary to the Warsaw Convention, for the Unification of Certain Rules relating to International Carriage by Air Performed by a Person other than the Contracting Carrier, signed at Guadalajara on 18 September 1961 (hereinafter called the Guadalajara Convention); (d) the Protocol to amend the Convention for the Unification of Certain Rules relating to International Carriage by Air signed at Warsaw on 12 October 1929 as amended by the Protocol done at The Hague on 28 September 1955, signed at Guatemala City on 8 March 1971 (hereinafter called the Guatemala City Protocol); (e) Additional Protocol Nos. 1 to 3 and Montreal Protocol No. 4 to amend the Warsaw Convention as amended by The Hague Protocol or the Warsaw Convention as amended by both The Hague Protocol and the Guatemala City Protocol, signed at Montreal on 25 September 1975 (hereinafter called the Montreal Protocols); or 2. within the territory of any single State Party to this Convention by virtue of that State being Party to one or more of the instruments referred to in sub-paragraphs (a) to (e) above.

Article 56 - States with more than one system of law 1. If a State has two or more territorial units in which different systems of law are applicable in relation to matters dealt with in this Convention, it may at the time of signature, ratification,


- � -26acceptance, approval or accession declare that this Convention shall extend to all its territorial units or only to one or more of them and may modify this declaration by submitting another declaration at any time. 2. Any such declaration shall be notified to the Depositary and shall state expressly the territorial units to which the Convention applies. 3. In relation to a State Party which has made such a declaration: (a) references in Article 23 to "national currency" shall be construed as referring to the currency of the relevant territorial unit of that State; and (b) the reference in Article 28 to "national law" shall be construed as referring to the law of the relevant territorial unit of that State.

Article 57 - Reservations No reservation may be made to this Convention except that a State Party may at any time declare by a notification addressed to the Depositary that this Convention shall not apply to: (a) international carriage by air performed and operated directly by that State Party for non-commercial purposes in respect to its functions and duties as a sovereign State; and/or (b) the carriage of persons, cargo and baggage for its military authorities on aircraft registered in or leased by that State Party, the whole capacity of which has been reserved by or on behalf of such authorities. IN WITNESS WHEREOF the undersigned Plenipotentiaries, having been duly authorized, have signed this Convention. DONE at Montreal on the 28th day of May of the year one thousand nine hundred and ninety-nine in the English, Arabic, Chinese, French, Russian and Spanish languages, all texts being equally authentic. This Convention shall remain deposited in the archives of the International Civil Aviation Organization, and certified copies thereof shall be transmitted by the Depositary to all States Parties to this Convention, as well as to all States Parties to the Warsaw Convention, The Hague Protocol, the Guadalajara Convention, the Guatemala City Protocol and the Montreal Protocols. KLM v. CA • Article 30 of the Warsaw providing that in case of transportation to be performed by various successive carriers, the passenger can take action only against the carrier who performed the transportation during which the accident or the delay occurred presupposes the occurrence of either an accident or delay in the course of the air strip, and does not apply if the damage is caused by the willful misconduct on the part of the carrier's employee or agent acting within the scope of his employment. • Where the passage tickets provide that the carriage to be performed thereunder by several successive carriers "is to be regarded as a single operation," the carrier which issued the tickets for the entire trip in effect guaranteed to the passenger that the latter shall have sure space in the various carriers which would ferry him through the various segments of the trip, and the ticket-issuing carrier assumes full responsibility for the entire trip and shall be held accountable for the breach of that guaranty whether the breach occurred in its own lines or in those of the other carriers. Pan American World Airways, Inc. v. IAC • On the basis of the stipulations printed at the back of the Airline ticket, specifically referring to the applicability of the Warsaw convention the airline carriers liability for the lost baggage of private respondent Pangan is limited to $20.00 per kilo or $600.00, as stipulated at the back of the ticket as the latter did not declare a higher value for his baggage and pay the corresponding additional charges, the case of Ong Yiu v. Court of Appeals is squarely applicable to the instant case. • In the absence of a showing that petitioner's attention was called to the special circumstances requiring prompt delivery of private respondent Pangan's luggages, petitioner cannot be held liable for the cancellation of private respondents' contracts as it could not have foreseen such an eventuality when it accepted the luggages for transit.

The proximate cause of the cancellation of the contracts was private respondent Pangan's failure to deliver the promotional and advertising materials on the dates agreed upon. For this petitioner cannot be held liable. Private respondent Pangan had not declared the value of the two luggages he had checked in and paid additional charges. Neither was petitioner privy to respondents' contracts nor was its attention called to the condition therein requiring delivery of the promotional and advertising materials on or before a certain date. Northwest Airlines v. Cuenca • Articles 17, 18 and 19 of the Warsaw Convention of 1929 merely declare the airlines liable for damage in the cases enumerated therein, if the conditions specified are present. Neither the provisions of said articles nor others regulate or exclude liability for other breaches of contract by the air carriers. PAL v. CA • Petitioner contends that under the Warsaw Convention, its liability, if any, cannot exceed US $20.00 based on weight as private respondent Co did not declare the contents of his baggage nor pay traditional charges before the flight. We find no merit in that contention. The liability of the common carrier for the loss, destruction or deterioration of goods transported from a foreign country to the Philippines is governed primarily by the New Civil Code. In all matters not regulated by said Code, the rights and obligations of common carriers shall be governed by the Code of Commerce and by Special Laws. Since the passenger's destination in this case was the Philippines, Philippine law governs the liability of the carrier for the loss of the passenger's luggage. • In this case, the petitioner failed to overcome, not only the presumption, but more importantly, the private respondent's evidence, proving that the carrier's negligence was the proximate cause of the loss of his baggage. Furthermore, petitioner acted in bad faith in faking a retrieval receipt to bail itself out of having to pay Co's claim. Luna v. CA • The Warsaw Convention does not operate as an exclusive enumeration of the instances for declaring an airline liable for breach of contract of carriage or as an absolute limit of the extent of that liability. The application of the Convention must not therefore be construed to preclude the operation of the Civil Code and other pertinent laws. • Hence, petitioners' alleged failure to file a claim with the common carrier as mandated by the provisions of the Warsaw Convention should not be a ground for the summary dismissal of their complaints since private respondent may still be held liable for breach of other relevant laws which may provide a different period or procedure for filing a claim. Considering that petitioners indeed filed a claim which private respondent admitted having received on 21 June, 1989, their demand may have very well been filed within the period prescribed by those applicable laws. Mapa v. CA • The Warsaw Convention does not apply. The transportation involved in this case does not fall under the definition of international transportation under the said Convention. There are then two categories of international transportation, (1) that where the place of departure and the place of destination are situated within the territories of two High Contracting Parties regardless of whether or not there be a break in the transportation or a transshipment; and (2) that where the place of departure and the place of destination are 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 the power is not a party of the Convention. • The contracts of transportation in this case are evidenced by the two TWA tickets, both purchased and issued in Bangkok, Thailand. On the basis alone of the provisions therein, it is obvious that the place of departure and the place of destination are all in the territory of the United States, or of a single High Contracting Party. The contracts, therefore, cannot come within the purview of the first category of international transportation. Neither can it be under the second category since there was NO agreed stopping place within a territory subject to the sovereignty, mandate, or authority of another power. • The only way to bring the contracts between Purita and Carmina Mapa, on the one hand, and TWA, on the other, within the first category


- � -27of "international transportation" is to link them with, or to make them an integral part of, the Manila-Los Angeles travel of Purita and Carmina through PAL aircraft. The "linkages" which have been pointed out by the TWA, the trial court, and the Court of Appeals are (1) the handwritten notations on the two TWA tickets; and (2) the entries made by petitioners Purita and Carmina Mapa in column YOUR COMPLETE ITINERARY in TWA's Passenger Property Questionnaire, wherein they mentioned their travel from Manila to Los Angeles in flight PR 102. The alleged "international tickets" mentioned in the notations in conjunction with which the two TWA tickets were issued were not presented. • TWA does not claim that the Manila-Los Angeles contracts of transportation which brought Purita and Carmina to Los Angeles were also its contracts. It does not deny the assertion of the petitioners that those contracts were independent of the TWA tickets issued in Bangkok, Thailand. No evidence was offered that TWA and PAL had an agreement concerning transportation of passengers from points of departures not served with aircrafts of one or the other. PAL v. CA • Petitioner cannot claim the benefit of limited liability. The baggage check was not presented by the petitioner in the trial court inasmuch as it merely relied on, and adopted private respondents’ exhibits, none of which was offered for the purpose of proving the missing link. Article 4(2), Section II of the Warsaw Convention provides that the baggage check shall be made out in duplicate, one part for the passenger and the other part for the carrier. Under the second sentence of Article 4, paragraph 4, if the carrier accepts the baggage without a baggage check having been delivered, if the baggage check does not contain the particulars set at out at (d), (f), and (h) above, the carrier shall not be entitled to avail himself of those provisions of the Convention which exclude or limit his liability. Cathay Pacific Airways, Ltd. v. CA • The Warsaw Convention does not regulate, much less exempt, the carrier from liability for damages for violating the rights of its passengers under the contract of carriage, especially if willful misconduct on the part of the carrier's employees is found or established. Sabena Belgian World Airlines v. CA • The Warsaw Convention denies to the carrier the availment of the provisions which exclude or limit his liability if the damage is caused by his willful misconduct or by such default on his part as is considered to be equivalent to willful misconduct, or if the damage is caused by any agent of the carrier acting within the scope of his employment. The loss of said baggage not only once by twice underscores the wanton negligence and lack of care on the part of the carrier. The attendance of gross negligence (given the equivalent of fraud or bad faith) holds the common carrier liable for all damages which can be reasonably attribute, although unforeseen, to the non-performance of the obligation, including moral and exemplary damages. United Airlines v. Uy • Respondent is suing on 2 causes of action: (a) the shabby and humiliating treatment he received from petitioner's employees at the San Francisco Airport which caused him extreme embarrassment and social humiliation; and, (b) the slashing of his luggage and the loss of his personal effects amounting to US $5,310.00. While his second cause of action — an action for damages arising from theft or damage to property or goods — is well within the bounds of the Warsaw Convention, his first cause of action — an action for damages arising from the misconduct of the airline employees and the violation of respondent's rights as passenger — clearly is not. • Insofar as the first cause of action is concerned, respondent's failure to file his complaint within the 2-year limitation of the Warsaw Convention does not bar his action since petitioner airline may still be held liable for breach of other provisions of the Civil Code which prescribe a different period or procedure for instituting the action, specifically, Art. 1146 thereof which prescribes 4 years for filing an action based on torts. • As for respondent's second cause of action, indeed the travaux preparatories of the Warsaw Convention reveal that the delegates thereto intended the 2-year limitation incorporated in Art. 29 as an

absolute bar to suit and not to be made subject to the various tolling provisions of the laws of the forum. This therefore forecloses the application of our own rules on interruption of prescriptive periods. Article 29, par. (2), was intended only to let local laws determine whether an action had been commenced within the 2-year period, and within our jurisdiction an action shall be deemed commenced upon the filing of a complaint. • Respondent filed his complaint more than 2 years later. However, respondent was forestalled from immediately filing an action because petitioner airline gave him the runaround, answering his letters but not giving in to his demands. True, respondent should have already filed an action at the first instance when his claims were denied by petitioner but the same could only be due to his desire to make an out-of-court settlement for which he cannot be faulted. Hence, despite the express mandate of Art. 29 of the Warsaw Convention, such rule shall not be applied in the instant case because of the delaying tactics employed by petitioner airline itself. Lufthansa German Airlines v. CA • Antiporda was stranded in Bombay on his way to Malawi, after disembarking from a plane of Lufthansa from Singapore. From Bombay to Malawi, he was to ride on a plane of Air Kenya, but his seat was given to a “very important person”. Thus, he was left in Bombay, without being given any accommodations. • Antiporda was issued a confirmed Lufthansa ticket all throughout his 5-leg trip. His ticket stated that the carriage to be performed by several successive carriers is regarded as a single operation. Thus, Lufthansa, is clearly the principal in the contract of carriage with Antiporda and remains to be so, regardless of those instances when actual carriage was to be performed by various carriers. Lufthansa in effect guaranteed that the successive carriers, such as Air Kenya, would honor his ticket, assure him of space therein and transport him on a particular segment of his trip. • Section 2, Article 30 of the Warsaw Convention does not contemplate the instance of bumping-off but merely simple delay, and thus cannot proved a handy excuse for Lufthansa to exculpate itself from any liability. British Airways v. CA, Mahtani and PAL • The nature of an airline’s contract of carriage partakes of two types, namely: a contract to deliver a cargo or merchandise to its destination and a contract to transport passengers to their destination. • In determining the amount of compensatory damages in breach of contract involving misplaced luggage, it is vital that the claimant satisfactorily prove during the trial the existence of the factual basis of the damages and its causal connection to defendant’s acts. • In a contract of carriage, a declaration by the passenger of a higher value is needed to recover a greater amount. • An air carrier is not liable for the loss of baggage in an amount in excess of the limits specified in the tariff which was filed with the proper authorities, such tariff being binding on the passenger regardless of the passenger’s lack of knowledge thereof or assent thereto. American Airlines v. CA, Salas and Mendoza • The contract of carriage entered into by the private respondent with Singapore Airlines, and subsequently with the petitioner, to transport him to nine cities in different countries is a contract of international transportation and the provisions of the Convention automatically apply. • The contract of carriage between the private respondent and Singapore Airlines although performed by different carriers under a series of airline tickets, including that issued by the petitioner, constitutes a single operation. Members of the IATA are under a general pool partnership agreement wherein they act as agent of each other in the issuance of the tickets to contracted passengers to boost ticket sales worldwide and at the same time provide passengers easy access to airlines which are otherwise inaccessible in some parts of the world. • The number of tickets issued does not detract from the oneness of the contract of carriage as long as the parties regard the contract as a single operation. The evident purpose underlying this Article is to promote international air travel by facilitating the procurement of a series of contracts of air transportation through a single principal and obligating different airlines to be bound by one contract of


- � -28transportation. Petitioner’s acquiescence to take the place of the original designated carrier binds it under the contract of carriage entered into by the private respondent and Singapore Airlines in Manila. The third option of the plaintiff under Art. 28(1) of the Warsaw Convention e.g., to sue in the place of business of the carrier wherein the contract was made, is therefore, Manila, and Philippine courts are clothed with jurisdiction over this case. While this case was filed in Cebu and not in Manila the issue of venue is no longer an issue as the petitioner is deemed to have waived it when it presented evidence before the trial court. China Airlines v. Daniel Chiok • It is significant to note that the contract of air transportation was between petitioner and respondent, with the former endorsing to PAL the Hong Kong-to-Manila segment of the journey. Such contract of carriage has always been treated in this jurisdiction as a single operation. This jurisprudential rule is supported by the Warsaw Convention, to which the Philippines is a party, and by the existing practices of the International Air Transport Association (IATA). • Members of the 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 ticket sales worldwide and at the same time provide passengers easy access to airlines which are otherwise inaccessible in some parts of the world. Booking and reservation among airline members are allowed even by telephone and it has become an accepted practice among them. A member airline which enters into a contract of carriage consisting of a series of trips to be performed by different carriers is authorized to receive the fare for the whole trip and through the required process of interline settlement of accounts by way of the IATA clearing house an airline is duly compensated for the segment of the trip serviced. With CAL as principal, and merely endorsing to PAL a segment of the trip as mere carrying agent, it was the latter who is liable for damages. However, a cross-claim is proper against PAL filed by CAL. Federal Express v. American Home • Basic is the requirement that before suing to recover loss of or damage to transported goods, the plaintiff must give the carrier notice of the loss or damage, within the period prescribed by the Warsaw Convention and/or the airway bill. In this jurisdiction, the filing of a claim with the carrier within the time limitation therefor actually constitutes a condition precedent to the accrual of a right of action against a carrier for loss of or damage to the goods. The shipper or consignee must allege and prove the fulfillment of the condition. If it fails to do so, no right of action against the carrier can accrue in favor of the former. The aforementioned requirement is a reasonable condition precedent; it does not constitute a limitation of action. • The requirement of giving notice of loss of or injury to the goods is not an empty formalism. The fundamental reasons for such a stipulation are (1) to inform the carrier that the cargo has been damaged, and that it is being charged with liability therefor; and (2) to give it an opportunity to examine the nature and extent of the injury. “This protects the carrier by affording it an opportunity to make an investigation of a claim while the matter is fresh and easily investigated so as to safeguard itself from false and fraudulent claims.” • When an airway bill -- or any contract of carriage for that matter -- has a stipulation that requires a notice of claim for loss of or damage to goods shipped and the stipulation is not complied with, its enforcement can be prevented and the liability cannot be imposed on the carrier. To stress, notice is a condition precedent, and the carrier is not liable if notice is not given in accordance with the stipulation. Failure to comply with such a stipulation bars recovery for the loss or damage suffered. • Being a condition precedent, the notice must precede a suit for enforcement. In the present case, there is neither an allegation nor a showing of respondents’ compliance with this requirement within the prescribed period. While respondents may have had a cause of action then, they cannot now enforce it for their failure to comply with the aforesaid condition precedent. PAL v. Hon. Savillo • If cause of action claims moral damages, not covered by Warsaw Convention. Article 19 of the Warsaw Convention provides for liability on the part of a carrier for “damages occasioned by delay in the

transportation by air of passengers, baggage or goods. Article 24 excludes other remedies by further providing that “(1) in the cases covered by articles 18 and 19, any action for damages, however founded, can only be brought subject to the conditions and limits set out in this convention.” Therefore, a claim covered by the Warsaw Convention can no longer be recovered under local law, if the statue of limitations of two years has elapsed. Nevertheless, this Court notes that jurisprudence in the Philippines and the United States also recognizes that the Warsaw Convention does not “exclusively regulate” the relationship between passenger and carrier on an international flight. In U.S. v. Uy, this Court distinguished between the (1) damage to the passenger’s baggage and (2) humiliation he suffered at the hands of the airline’s employees. The First cause of action was covered by the Warsaw Convention which prescribes in two years, while the second was covered by the provisions of the Civil Code on torts, which prescribes in four years. • In Mahaney v. Air France (US case), the court therein ruled that if the plaintiff were to claim damages based solely on the delay she experienced- for instance, the costs of renting a van, which she had to arrange on her own as a consequence of the delay the complaint would be barred by the two–year statute of limitations. However, where the plaintiff alleged that the airlines subjected her to unjust discrimination or undue or unreasonable preference or disadvantage, an act punishable under the US law, then the plaintiff may claim purely nominal compensatory damages for humiliation and hurt feelings, which are not provided for by the Warsaw Convention. • In the Petition at bar, Savillo’s Complaint alleged that both PAL and Singapore Airlines were guilty of gross negligence, which resulted in his being subjected to “humiliation, embarrassment, mental anguish, serious anxiety, fear and distress” therefore this case is not covered by the Warsaw Convention. • When the negligence happened before the performance of the contract of carriage, not covered by the Warsaw Convention. Also, this case is comparable to Lathigra v. British Airways. In that case, it was held that the airlines’ negligent act of reconfirming the passenger’s reservation days before departure and failing to inform the latter that the flight had already been discontinued is not among the acts covered by the Warsaw Convention, since the alleged negligence did not occur during the performance of the contract of carriage but, rather, days before the scheduled flight. • In the case at hand, Singapore Airlines barred Savillo from boarding the Singapore Airlines flight because PAL allegedly failed to endorse the tickets of private respondent and his companions, despite PAL’s assurances to Savillo that Singapore Airlines had already confirmed their passage. While this fact still needs to heard and established by adequate proof before the RTC, an action based on these allegations will not fall under the Warsaw Convention, since the purported negligence on the party of PAL did not occur during the performance of the contract of carriage but days before the scheduled flight. Thus, the present action cannot be dismissed based on the Statue of Limitations provided under Article 29 of the Warsaw Convention. Edna Diago Lhuillier v. British Airways • The Republic of the Philippines is a party to the Convention for the Unification of Certain Rules Relating to International Transportation by Air, otherwise known as the Warsaw Convention. It took effect on February 13, 1933. The Convention was concurred in by the Senate, through its Resolution No. 19, on May 16, 1950. The Philippine instrument of accession was signed by President Elpidio Quirino on October 13, 1950, and was deposited with the Polish government on November 9, 1950. The Convention became applicable to the Philippines on February 9, 1951. On September 23, 1955, President Ramon Magsaysay issued Proclamation No. 201, declaring our formal adherence thereto, "to the end that the same and every article and clause thereof may be observed and fulfilled in good faith by the Republic of the Philippines and the citizens thereof." The Convention is thus a treaty commitment voluntarily assumed by the Philippine government and, as such, has the force and effect of law in this country. • The Warsaw Convention applies because the air travel, where the alleged tortious conduct occurred, was between the United Kingdom and Italy, which are both signatories to the Warsaw Convention. Thus, when the place of departure and the place of destination in a contract of


- � -29carriage are situated within the territories of two High Contracting Parties, said carriage is deemed an "international carriage". The High Contracting Parties referred to herein were the signatories to the Warsaw Convention and those which subsequently adhered to it. • Under Article 28(1) of the Warsaw Convention, the plaintiff may bring the action for damages before – 1. the court where the carrier is domiciled; 2. the court where the carrier has its principal place of business; 3. the court where the carrier has an establishment by which the contract has been made; or 4. the court of the place of destination. • In this case, it is not disputed that respondent is a British corporation domiciled in London, United Kingdom with London as its principal place of business. Hence, under the first and second jurisdictional rules, the petitioner may bring her case before the courts of London in the United Kingdom. In the passenger ticket and baggage check presented by both the petitioner and respondent, it appears that the ticket was issued in Rome, Italy. Consequently, under the third jurisdictional rule, the petitioner has the option to bring her case before the courts of Rome in Italy. Finally, both the petitioner and respondent aver that the place of destination is Rome, Italy, which is properly designated given the routing presented in the said passenger ticket and baggage check. Accordingly, petitioner may bring her action before the courts of Rome, Italy. We thus find that the RTC of Makati correctly ruled that it does not have jurisdiction over the case filed by the petitioner. ANNOTATIONS by JORGE R. COQUIA: (2000) • The Philippines adhered to the Convention on November 9, 1950 and entered into force in the country on February 7, 1957 • Main objectives of the Warsaw Convention: to decrease and simplify litigation and thereby provide prompt compensation to air accident victims or their families • Applies to all international transportation of persons, baggage or goods performed by aircraft for hire, enumerates instances when the carrier is liable, fixing the minimum amount of damages to be included in each case . • Chapter II, as amended: the carriers is liable in the event of the death or wounding of any passenger, or an other bodily injury suffered by a passenger, if the accident took place on board the aircraft or in the course of the operation of embarking or disembarking • The carrier is liable for damages for loss or damage to checked in luggage, if the damage took place during the transportation by air • The procedures rules of the court of the forum shall apply • The action will prescribe if not brought within 2 years from the date of the arrival at the destination, or from the date on which the aircraft ought to have arrived, or from the date on which the transportation stopped. • The passenger who takes several carriers shall be deemed to be one of the contracting parties insofar as said carrier who performed the transportation during the accident or delay occurred, unless by express agreement the first carrier has assumed liability for the whole journey. • With respect to baggage or goods: the right of action against the first carrier, and the passenger or consignee who is entitled to deliver shall have the right of action against the last carrier. • These carriers are jointly and severally liable to the passenger or consignor or consignee. STEPS: 1. International Carriage a. 1 High Contracting Party b. 2 High Contracting Parties • If none: Warsaw Convention does not apply 2. Jurisdiction a. Residence of carrier b. Where carrier has his principal place of business c. Where he has an establishment by which the contract has been made

d. Place of destination • If none: WC doesn’t apply 3. Prescription 4. Limitation of Liability – defenses • Plaintiff: say there’s willful misconduct (therefore, unlimited liability) • You allege these matters in your Motion to Dismiss • If your Motion to Dismiss is denied, you may allege them in your: o petition for certiorari – c/o Rule 65 o trial – as a defense • Mere delay is not equivalent to willful misconduct

CODE OF COMMERCE OF THE PHILIPPINES COMMERCIAL CONTRACTS FOR TRANSPORTATION

ARTICLE 349. A contract of transportation by land or water ways of any kind shall be considered commercial: 1. When it has for its object merchandise or any article of commerce. 2. When, whatever its object may be, the carrier is a merchant or is habitually engaged in transportation for the public. When is a contract deemed commercial? Principal requirement is that the carrier be a merchant or is habitually engaged in transportation for the public. Object carried is of little importance, and even transport of persons can be considered commercial, provided that the carrier is a merchant or habitually engaged in transportation work for the public. A contract of transportation be air is regarded as commercial (Mendoza v. PAL). ARTICLE 350. The shipper as well as the carrier of merchandise or goods may mutually demand that a bill of lading be made, stating: 1. The name, surname and residence of the shipper. 2. The name, surname and residence of the carrier. 3. The name, surname and residence of the person to whom or to whose order the goods are to be sent or whether they are to be delivered to the bearer of said bill. 4. The description of the goods, with a statement of their kind, of their weight, and of the external marks or signs of the packages in which they are contained. 5. The cost of transportation. 6. The date on which shipment is made. 7. The place of delivery to the carrier. 8. The place and the time at which delivery to the consignee shall be made. 9. The indemnity to be paid by the carrier in case of delay, if there should be any agreement on this matter. Bills of Lading: a written acknowledgement of the receipt of the goods and an agreement to transport and to deliver them at a specified place to a person named therein or to his order. Nature of BoL:

1. Each bill is a contract in itself and the parties are bound by its terms.

2. A bill is also a receipt 3. It is a symbol of the goods covered by it. – they are

documents of title (may be negotiated if negotiable)


- � -30When negotiable? It states that the goods referred to therein will be delivered to the bearer or to the order of any person named in such a document. Non-negotiable – goods referred to therein will be delivered to the person specified therein. Types: Clean Bill of Lading – One which does not indicate any defect in the goods. Foul Bill of Lading – One which contains and annotation thereon indicating that the goods covered by it are in a bad condition. Spent Bill of Lading – Covers goods which have already been delivered by the carrier without surrendering the Bill. Through Bill of Lading – Issued by a carrier who is obliged to use the facilities of other carriers as well as his own facilities to transport the goods. On Boar Bill of Lading – States that the goods have been received on board the vessels which are to carry the goods. Received-for-shipment Bill of Lading – States that the goods have been received for shipment with or without specifying the vessles on which they are to be shipped. Custody Bill of Lading – Issued by the carrier to whom the goods have been delivered for shipment but he steamer indicated thereon which is to carry the goods has not yet reached the port where the goods are held for shipment. Port Bill of Lading – Issued by the carrier to whom the goods have been delivered and the steamer indicated in the bill by which the goods are to shipped are already in the port where the goods are held for shipment. ARTICLE 351. In transportation made by railroads or other enterprises subject to regulation rate and time schedules, it shall be sufficient for the bills of lading or the declaration of shipment furnished by the shipper to refer, with respect to the cost, time and special conditions of the carriage, to the schedules and regulations the application of which he requests; and if the shipper does not determine the schedule, the carrier must apply the rate of those which appear to be the lowest, with the conditions inherent thereto, always including a statement or reference to in the bill of lading which he delivers to the shipper. ARTICLE 352. The bills of lading, or tickets in cases of transportation of passengers, may be diverse, some for persons and others for baggage; but all of them shall bear the name of the carrier, the date of shipment, the points of departure and arrival, the cost, and, with respect to the baggage, the number and weight of the packages, with such other manifestations which may be considered necessary for their easy identification. ARTICLE 353. The legal evidence of the contract between the shipper and the carrier shall be the bills of lading, by the contents of which the disputes which may arise regarding their execution and performance shall be decided, no exceptions being admissible other than those of falsity and material error in the drafting. After the contract has been complied with, the bill of lading which the carrier has issued shall be returned to him, and by virtue of the exchange of this title with the thing transported, the respective obligations and actions shall be considered cancelled, unless in the same act the claim which the parties may wish to reserve be reduced to writing, with the exception of that provided for in Article 366. In case the consignee, upon receiving the goods, cannot return the bill of lading subscribed by the carrier, because of its loss or of any other cause, he must give the latter a receipt for the goods

delivered, this receipt producing the same effects as the return of the bill of lading. ARTICLE 354. In the absence of a bill of lading, disputes shall be determined by the legal proofs which the parties may present in support of their respective claims, according to the general provisions established in this Code for commercial contracts. The Bill itself is not essential to the contract – so long as the requisites of a contract are present (Consent, object and consideration). It is merely evidence of such contract. As evidence of the contract, may not be varied or altered. It is not essential to the contract, although it may become obligatory by reason of the regulations of railroad companies, or as a condition imposed in the contract by the agreement of the parties themselves. If there is no bill, disputes will be governed by the rules laid down by Article 354. As a receipt – may be varied or altered or explained. After the contract of transportation has been complied with, the bill shall be returned to the issuing carrier in exchange for the goods. But, if it cannot be returned due to its loss or any other cause, a receipt for the goods must be provided by the shipper or consignee. Return of bill: obligations and actions of the parties against each other are considered cancelled, except where a receipt for claims of the parties are made at the time of the giving of the bill or the receipt. ARTICLE 355. The responsibility of the carrier shall commence from the moment he receives the merchandise, personally or through a person charged for the purpose, at the place indicated for receiving them. ARTICLE 356. Carriers may refuse packages which appear unfit for transportation; and if the carriage is to be made by railway, and the shipment is insisted upon, the company shall transport them, being exempt from all responsibility if its objections, is made to appear in the bill of lading. ARTICLE 357. If by reason of well-founded suspicion of falsity in the declaration as to the contents of a package the carrier should decide to examine it, he shall proceed with his investigation in the presence of witnesses, with the shipper or consignee in attendance. If the shipper or consignee who has to be cited does not attend, the examination shall be made before a notary, who shall prepare a memorandum of the result of the investigation, for such purposes as may be proper. If the declaration of the shipper should be true, the expense occasioned by the examination and that of carefully repacking the packages shall be for the account of the carrier and in a contrary case for the account of the shipper. When responsibility of carrier begins: From the moment he receives the merchandise, delivery being done either personally, or through duly authorized representatives/agents, at the place indicated for receiving the merchandise. • Parties to a kabit system cannot ask the court for relief in case of disputes regarding their contract because such contract is void. (Lita Ent. v. IAC) • The registered owner of a vehicle is directly liable for injuries

caused by such vehicle even if he has already sold or transferred it. (Perez v. Gutierrez)

• When the operator in a kabit system gets into an accident and the one at fault is a 3rd party, the operator has standing to sue the negligent party/party in fault. (Abelardo v. CA) • It is true that the registered owner of a vehicle is directly liable for injuries caused by such vehicle even if he has already sold or


- � -31transferred it. However, he may ask for reimbursement from the transferee for whatever amount he was adjudged to pay. (Tamayo v. Aquino) • Only the registered owner of a public service vehicle is responsible for damages that may arise from consequences incident to its operation, or caused to any of the passengers therein. The live-in partner of the owner has nothing to do with the vehicle. (Juaniza v. Jose) • If the lesse of the vehicle is a mere dummy corporation of the

registered owner, the latter is still liable for the accident even if due to the fault of the said lessor. (MYC Agro v. Vda. De Caldo)

• Even if the registered owner is directly liable for accidents, recovery by the registered owner or operator may be made in any form-either by a cross-claim, third-party complaint, or an independent action. (Jereos v CA)

Right to Refuse Packages: A common carrier can refuse to accept packages if unfit for transportation. But ordinarily, may not refuse a particular class of good to the prejudice of the traffic in those goods. Falsity in the declaration of the contents: If there is a well founded belief or suspicion of falsity in the declaration as to the contents of the package, he may examine it in the manner laid down in Art. 357. ARTICLE 358. If there is no period fixed for the delivery of the goods the carrier shall be bound to forward them in the first shipment of the same or similar goods which he may make point where he must deliver them; and should he not do so, the damages caused by the delay should be for his account. Time for delivery when no period fixed: Carrier bound to forward the goods in the first shipment of the same or similar goods which he makes to the point of delivery. If not, he is liable for damages caused by delay. When period fixed for delivery: Deliver the goods within the time fixed, failure to do so, the carrier will pay for indemnity provided in the BoL. Under the Civil Code, damages also paid if carrier refuses to pay for the indemnity provided. When no indemnity stipulated: carrier liable for the damages which the delay may be caused. Other effects of delay: Natural disaster will not free carrier from responsibility. Contract limiting liability (if delay without just cause and negligent) cannot be availed of. When delay amounts to conversion: If carrier has not delivered within a reasonable time after reaching destination, it is liable for conversion of the property. Consignee may waive all title to the goods and sue for conversion, and subsequent tender by the carrier not available as a defense. Consignee entitled to recover value of the goods at the time they should have been delivered. Tender before suit: Consignee cannot refuse to receive the goods and sue for conversion. Remedy left is an action for damages due to the delay. ARTICLE 359. If there is an agreement between the shipper and the carrier as to the road over which the conveyance is to be made, the carrier may not change the route, unless it be by reason of force majeure; and should he do so without this cause, he shall be liable for all the losses which the goods he transports may suffer from any other cause, beside paying the sum which may have been stipulated for such case. When on account of said cause of force majeure, the carrier had to take another route which produced an increase in transportation charges, he shall be reimbursed for such increase upon formal proof thereof. Change of Route without just cause: Carrier liable for losses, due to the change, and for other causes, and limiting liability not available. If

there is no agreed route, carrier must select route which may be the shortest, least expensive and practically passable. ARTICLE 360. The shipper, without changing the place where the delivery is to be made, may change the consignment of the goods which he delivered to the carrier, provided that at the time of ordering the change of consignee the bill of lading signed by the carrier, if one has been issued, be returned to him, in exchange for another wherein the novation of the contract appears. The expenses which this change of consignment occasions shall be for the account of the shipper. ARTICLE 361. The merchandise shall be transported at the risk and venture of the shipper, if the contrary has not been expressly stipulated. As a consequence, all the losses and deteriorations which the goods may suffer during the transportation by reason of fortuitous event, force majeure, or the inherent nature and defect of the goods, shall be for the account and risk of the shipper. Proof of these accidents is incumbent upon the carrier. “at the risk and venture of the shipper” – means that the shipper will suffer losses and deteriorations resulting from fortuitous events, force majeure, or inherent nature and defects of the goods. It does not mean that the carrier is free from liability for losses and deteriorations arising from his negligence or fault which is presumed. ARTICLE 362. Nevertheless, the carrier shall be liable for the losses and damages resulting from the causes mentioned in the preceding article if it is proved, as against him, that they arose through his negligence or by reason of his having failed to take the precautions which usage has established among careful persons, unless the shipper has committed fraud in the bill of lading, representing the goods to be of a kind or quality different from what they really were. If, notwithstanding the precautions referred to in this article, the goods transported run the risk of being lost, on account of their nature or by reason of unavoidable accident, there being no time for their owners to dispose of them, the carrier may proceed to sell them, placing them for this purpose at the disposal of the judicial authority or of the officials designated by special provisions. Burden of Proof: Carrier obliged to show that the damages suffered by the goods carried are by reason of fortuitous event, force majeure, or inherent nature of the goods: i.e. onus probandi is upon the carrier to prove that the injury was not due to his fault. Once proved, onus probandi shifted to the shipper to show negligence. If goods run the risk of being lost due to their nature or unavoidable accident – carrier may sell the goods, placing them at the disposal of the judicial authority or officials designated by special provisions of law. ARTICLE 363. Outside of the cases mentioned in the second paragraph of Article 361, the carrier shall be obliged to deliver the goods shipped in the same condition in which, according to the bill of lading, they were found at the time they were received, without any damage or impairment, and failing to do so, to pay the value which those not delivered may have at the point and at the time at which their delivery should have been made. If those not delivered form part of the goods transported, the consignee may refuse to receive the latter, when he proves that he cannot make use of them independently of the others. Duty to deliver goods: Carrier to deliver the goods and also to deliver them in the condition in which according to the BoL they were found at the time they were received, without damage or impairment.


- � -32Partial delivery: consignee may refuse to receive if he can prove that they may not be independently used. Estoppel of shipper by laches: Neglect of shipper to demand immediately, or within a reasonable time the return of the merchandise shipped or its value, places the carrier at a disadvantageous position to show that it had fulfilled what it had undertaken. Failure of shipper to assert his right constitutes estoppel by laches. ARTICLE 364. If the effect of the damage referred to in Article 361 is merely a diminution in the value of the goods, the obligation of the carrier shall be reduced to the payment of the amount which, in the judgment of experts, constitutes such difference in value. When value of goods diminished: Where all goods delivered but value diminished considerably, obligation of carrier shall be reduced to the payment of the amount which, in the judgment of the experts, constitute such difference in value. ARTICLE 365. If, in consequence of the damage, the goods are rendered useless for sale and consumption for the purposes for which they are properly destined, the consignee shall not be bound to receive them, and he may have them in the hands of the carrier, demanding of the latter their value at the current price on that day. If among the damaged goods there should be some pieces in good condition and without any defect, the foregoing provision shall be applicable with respect to those damaged and the consignee shall receive those which are sound, this segregation to be made by distinct and separate pieces and without dividing a single object, unless the consignee proves the impossibility of conveniently making use of them in this form. The same rule shall be applied to merchandise in bales or packages, separating those parcels which appear sound. When damage renders goods useless: If damage affects all goods, consignee may abandon the goods to the carrier, who shall pay the damages. If only part of goods damaged, consignee may only abandon those damaged. If it is impossible to conveniently use the undamaged goods without those damaged, consignee may abandon all the goods. When consignee may abandon the goods:

1. Art. 336, when there is partial non-delivery and consignee proves that he cannot make use of the goods which may be delivered, independently of those not delivered.

2. Art. 365, where the goods are rendered useless for sale and consumption for the purposes which they are properly destined.

3. Art. 371, where there is delay through fault of the carrier. ARTICLE 366. Within the twenty-four hours following the receipt of the merchandise, the claim against the carrier for damage or average be found therein upon opening the packages, may be made, provided that the indications of the damage or average which gives rise to the claim cannot be ascertained from the outside part of such packages, in which case the claim shall be admitted only at the time of receipt. After the periods mentioned have elapsed, or the transportation charges have been paid, no claim shall be admitted against the carrier with regard to the condition in which the goods transported were delivered. Claim necessary to right of action: Damage may either be:

1. ascertainable only by opening of the packages; or - claim made within 24 hourse after receipt.

2. from the outside part of the packages. - claim must be made upon receipt.

In both cases, claim must be made before payment of transportation charges. These are conditions precedent to the accruing of the rights of action against carriers for damages caused to the merchandise. They are not limitations of action.

ARTICLE 367. If doubts and disputes should arise between the consignee and the carrier with respect to the condition of the goods transported at the time their delivery to the former is made, the goods shall be examined by experts appointed by the parties, and, in case of disagreement, by a third one appointed by the judicial authority, the results to be reduced to writing; and if the interested parties should not agree with the expert opinion and they do not settle their differences, the merchandise shall be deposited in a safe warehouse by order of the judicial authority, and they shall exercise their rights in the manner that may be proper. Dispute as to condition of the goods: Expert opinion may be availed of, but not conclusive on the parties. ARTICLE 368. The carrier must deliver to the consignee, without any delay or obstruction, the goods which he may have received, by the mere fact of being named in the bill of lading to receive them; and if he does not do so, he shall be liable for the damages which may be caused thereby. To whom delivery is to be made: To the consignee. If to the order of consignee, BoL must be presented, if not, carrier liable for misdelivery.

ARTICLE 366 COGSA Sec.3 (6)

Applicability

1. D o m e s t i c / i n t e r - i s l a n d /

coastwise transportation

2. Land, water, air transportation

3. Carriage of goods

1. International/

overseas/ fore ign ( f rom

foreign country to Phils.)

Note: subject to the rule on

Paramount Clause

2. Water/maritime

transportation

3. Carriage of goods

Notice of damage

1. Condition precedent

2. 24-hour period for claiming

latent damage

1. Not a condition

precedent

2. 3-day period for claiming

latent damage

Prescriptive period

None provided; Civ i l Code

applies.

One year from the date of

del ivery (del ivered but

damaged goods), or date

when the vessel left port or

from the date of delivery to

the arrastre (non-delivery or

loss).


- � -33

In case of conflicting orders – what moment the right of the shipper to countermand the shipment terminates: when the consignee or legitimate holder of the bill of lading appears with such bill of lading before the carrier and makes himself a party to the contract. • stoppage in transitu – seller’s right prevails ARTICLE 369. If the consignee cannot be found at the residence indicated in the bill of lading, or if he refuses to pay the transportation charges and expenses, or if he refuses to receive the goods, the municipal judge, where there is none of the first instance, shall provide for their deposit at the disposal of the shipper, this deposit producing all the effects of delivery without prejudice to third parties with a better right. When goods may be deposited:

1. Where the consignee cannot be found at the residence indicated

2. Where the consignee refuse to pay the transportation charges

3. Where the consignee refuses to receive the goods. Liability for failure to look for consignee: Carrier liable for the damages resulting from delay in the receipt of the goods by the consignee, occasioned by such want of diligence. To relieve himself of liability, store the goods after, by the use of reasonable diligence, he is unable to find the consignee. Effect of judicial intervention: Produces the effects of delivery, subject to third parties with a better right. ARTICLE 370. If a period has been fixed for the delivery of the goods, it must be made within such time, and, for failure to do so, the carrier shall pay the indemnity stipulated in the bill of lading, neither the shipper nor the consignee being entitled to anything else. If no indemnity has been stipulated and the delay exceeds the time fixed in the bill of lading, the carrier shall be liable for the damages which the delay may have caused. ARTICLE 371. In case of delay through the fault of the carrier, referred to in the preceding articles, the consignee may leave the goods transported in the hands of the former, advising him thereof in writing before their arrival at the point of destination. When this abandonment takes place, the carrier shall pay the full value of the goods as if they had been lost or mislaid. If the abandonment is not made, the indemnification for losses and damages by reason of the delay cannot exceed the current price which the goods transported would have had on the day and at the place in which they should have been delivered; this same rule is to be observed in all other cases in which this indemnity may be due. Right of abandonment: Consignee has exceptional but limited right to abandon the goods in case of delay in delivery. May be exercised between the moment when the fault of the carrier produces the delay until the moment just before the arrival of the goods at the place of delivery. How: communicating the abandonment to the carrier in writing. If there is abandonment – full price or value of goods paid.

If no abandonment – indemnity not to exceed the current price which the goods had on the day when to be delivered.

ARTICLE 372. The value of the goods which the carrier must pay in cases if loss or misplacement shall be determined in accordance with that declared in the bill of lading, the shipper not being allowed to present proof that among the goods declared therein there were articles of greater value and money. Horses, vehicles, vessels, equipment and all other principal and accessory means of transportation shall be especially bound in favor of the shipper, although with respect to railroads said liability shall be subordinated to the provisions of the laws of concession with respect to the property, and to what this Code established as to the manner and form of effecting seizures and attachments against said companies. Shipper’s Lien – Security for the payment of the value of the goods which the carrier must pay in cases of loss or misplacement. ARTICLE 373. The carrier who makes the delivery of the merchandise to the consignee by virtue of combined agreements or services with other carriers shall assume the obligations of those who preceded him in the conveyance, reserving his right to proceed against the latter if he was not the party directly responsible for the fault which gave rise to the claim of the shipper or consignee. The carrier who makes the delivery shall likewise acquire all the actions and rights of those who preceded him in the conveyance. The shipper and the consignee shall have an immediate right of action against the carrier who executed the transportation contract, or against the other carriers who may have received the goods transported without reservation.

Misdelivery Non-delivery

There is delivery nut it is made to the wrong person.

There is no delivery at all. SHIPOWNER OR SHIP

AGENT

CONSIGNEE

What may be abandoned

Vessel Goods shipped

Instances

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 ¾ 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); and

3. In case of delay through the

fault of the carrier (Art. 371).

Effects

1. Transfer of ownership of

t h e v e s s e l f r o m t h e

shipowner to the shippers

or insurer.

2. In case of (2), the insurer

must pay the insured as if

there was actual total loss

of the vessel.

1. Transfer of ownership on the

goods from the shipper to the

carrier.

2. Carr ier should pay the

shipper the market value of

the goods at the point of

destination.


- � -34However, the reservation made by the latter shall not relieve them from the responsibilities which they may have incurred by their own acts. ARTICLE 374. The consignees to whom the shipment was made may not defer the payment of the expenses and transportation charges of the goods they receive after the lapse of twenty-four hours following their delivery; and in case of delay in this payment, the carrier may demand the judicial sale of the goods transported in an amount necessary to cover the cost of transportation and the expenses incurred. ARTICLE 375. The goods transported shall be especially bound to answer for the cost of transportation and for the expenses and fees incurred for them during their conveyance and until the moment of their delivery. This special right shall prescribe eight days after the delivery has been made, and once prescribed, the carrier shall have no other action than that corresponding to him as an ordinary creditor. ARTICLE 376. The preference of the carrier to the payment of what is owed him for the transportation and expenses of the goods delivered to the consignee shall not be cut off by the bankruptcy of the latter, provided it is claimed within the eight days mentioned in the preceding article. Enforcement of payment of charges:

1. Article 374, judicial sale of the goods transported 2. Article 375, by creating a lien in favor of the carrier on the

goods transported. Right to sue not excluded: The mere fact that the goods remain in the possession of the carrier because they have not been removed by the consignee, and the right to demand sale do not deprive the carrier to demand in a proper case the amounts owing to it by reason of the contract of transportation. Effect of Bankruptcy: Bankruptcy of the consignee shall not cut off the preference of the carrier, provided that the claim is made within 30 days from the date of delivery. Purpose of lien and time limit: lien in favor of the shipper. ARTICLE 377. The carrier shall be liable for all the consequences which may arise from his failure to comply with the formalities prescribed by the laws and regulations of the public administration, during the whole course of the trip and upon arrival at the point of destination, except when his failure arises from having been led into error by falsehood on the part of the shipper in the declaration of the merchandise. If the carrier has acted by virtue of a formal order of the shipper or consignee of the merchandise, both shall become responsible. Liability for non-compliance with government rules: carrier liable, even if non-compliance was due to order of shipper or consignee. He is exempted when the failure to comply was due to error by the falsehood on the part of the shipper in the declaration of the merchandise. ARTICLE 378. Agents for transportation shall be obliged to keep a special registry, with the formalities required by Article 36, in which all the goods the transportation of which is undertaken shall be entered in consecutive order of number and dates, with a statement of the circumstances required in Article 350 and others following for the respective bills of lading. ARTICLE 379. The provisions contained in Articles 349 and following shall be understood as equally applicable to those who, although they do not personally effect the transportation of the merchandise, contract to do so through others, either as contractors for a particular and definite operation, or as agents for transportations and conveyances. In either case they shall be subrogated in the place of the carriers themselves, with respect to the obligations and responsibility of the latter, as well as with regard to their rights.

BOOK THREE – MARITIME COMMERCE

TITLE ONE - VESSELS ARTICLE 573. Merchant vessels constitute property which may be acquired and transferred by any of the means recognized by law. The acquisition of a vessel must appear in a written instrument, which shall not produce any effect with respect to third persons if not inscribed in the registry of vessels. The ownership of a vessel shall likewise be acquired by possession in good faith, continued for three years, with a just title duly recorded. In the absence of any of these requisites, continuous possession for ten years shall be necessary in order to acquire ownership. A captain may not acquire by prescription the vessel of which he is in command. Effect of the new Civil Code: vessels engaged in the business of carrying or transporting passengers or goods, for compensation, offering their services to the public are common carriers; governed primarily by the provisions of the new Civil Code on common carriers, and subsidiarily by the provisions of the Code of Commerce and by special laws Vessels governed by the Code of Commerce: merchant ships; do not include war ships; craft that are not accessory to another as in the case of launches, lifeboats, etc. Vessels not included under the Code of Commerce: pleasure craft, yacht, pontoons, health service and harbor police vessels, floating storehouses, warships or patrol vessels, coast guard vessels, fishing vessels, towboats, and other craft destined to other uses Purpose of registration: necessary and indispensable in order that the purchaser’s rights may be maintained against a claim filed by a third person It is not now necessary for a chattel mortgage of a vessel to be noted in the registry of the register of deeds It is essential that a record of documents affecting the title to a vessel be entered in the office of the collector of customs at a port of entry, now in the Philippine Coast Guard • A small vessel used for the transportation of merchandise by sea and for the making of voyages from one port to another, equipped and victualed for this purpose by its owner, is a vessel, within the purview of the Code of Commerce, for the determination of the character and effect of the relations created between the owners of the merchandise laden on it and its owner. (yu Con v. Ipil) • Art 835 does not apply to small boats engaged in river and bay traffic. This articles apply to merchant vessels. When the mercantile codes speak of vessels, they refer solely and exclusively to merchant ships, as they do not include war ships furthermore, they almost always refer to craft which are not accessory to another as is the case of launches, lifeboats, etc. Moreover, the mercantile laws, in making use of the words ship, vessels, boat, embarkation, etc., refer exclusively to those which are engaged in the transportation of passengers and freight from one port to another or from one place to another; in a word, they refer to merchant vessels and in no way can they or should they be understood as referring to pleasure craft, yachts, pontoons, health service and harbor police vessels, floating storehouses, warships or patrol vessels, coast guard vessels, fishing vessels, towboats, and other craft destined to other uses. (Lopez v. Duruelo) ARTICLE 574. Builders of vessels may employ the materials and follow, with respect to their construction and rigging, the systems most suitable to their interests. Ship owners and seamen shall be subject to what the laws and regulations of the public administration on navigation, customs, health, safety of vessels, and other similar matters.


- � -35 ARTICLE 576. In the sale of a vessel it shall always be understood as included the rigging, masts, stores and engine of a streamer appurtenant thereto, which at the time belongs to the vendor. The arms, munitions of war, provisions and fuel shall not be considered as included in the sale. The vendor shall be under the obligation to deliver to the purchaser a certified copy of the record sheet of the vessel in the registry up to the date of the sale. ARTICLE 577. If the alienation of the vessel should be made while it is on a voyage, the freightage which it earns from the time it receives its last cargo shall pertain entirely to the purchaser, and the payment of the crew and other persons who make up its complement for the same voyage shall be for his account. If the sale is made after the vessel has arrived at the port of its destination, the freightage shall pertain to the vendor, and the payment of the crew and other individuals who make up its complement shall be for his account, unless the contrary is stipulated in either case. ARTICLE 578. If the vessel being on a voyage or in a foreign port, its owner or owners should voluntarily alienate it, either to Filipinos or to foreigners domiciled in the capital or in a port of another country, the bill of sale shall be executed before the consul of the Republic of the Philippines at the port where it terminates its voyage and said instrument shall produce no effect with respect to third persons if it is not inscribed in the registry of the consulate. The consul shall immediately forward a true copy of the instrument of purchase and sale of the vessel to the registry of vessels of the port where said vessel is inscribed and registered. In every case the alienation of the vessel must be made to appear with a statement of whether the vendor receives its price in whole or in part, or whether he preserves in whole or in part any claim on said vessel. In case the sale is made to a Filipino, this fact shall be stated in the certificate of navigation. When a vessel, being on a voyage, shall be rendered useless for navigation, the captain shall apply to the competent judge on court of the port of arrival, should it be in the Philippines; and should it be in a foreign country, to the consul of the Republic of the Philippines, should there be one, or, where there is none, to the judge or court or to the local authority; and the consul, or the judge or court, shall order an examination of the vessel to be made. If the consignee or the insurer should reside at said port, or should have representatives there, they must be cited in order that they may take part in the proceedings on behalf of whoever may be concerned. ARTICLE 579. After the damage to the vessel and the impossibility of her being repaired, in order to continue the voyage had been shown, its sale at public auction shall be ordered, subject to the following rules: 1. The hull of the vessel, its rigging, engines, stores, and other articles shall be appraised, after making an inventory, said proceedings to be brought to the notice of the persons who may wish to take part in the auction. 2. The order or decree ordering the auction to be held shall be posted in the usual places, an announcement thereof to be inserted in the Official Gazette and in two of the newspapers of the largest circulation of the port where the auction is to be held, should there be any. The period which may be fixed for the auction shall not be less than twenty days. 3. These announcements shall be repeated every ten days, and their publication shall be made to appear in the records. 4. The auction shall be held on the day fixed, with the formalities prescribed in the common law for judicial sales. 5. If the sale should take place while the vessel is in a foreign country, the special provisions governing such cases shall be observed.

ARTICLE 580. In all judicial sales of any vessel for the payment of creditors, the following shall have preference in the order stated 2 1. The credit in favor of the public treasury proven by means of an official certificate of competent authority. 2. The judicial costs of the proceedings, according to an appraisement approved by the judge or court. 3. The pilotage charges, tonnage dues, and the other sea or port charges, proven by means of proper certificates of the officers intrusted with the collection thereof. 4. The salaries of the depositaries and keepers of the vessel and any other expenses for its preservation from the time of arrival at the port until the sale, which appear to have been paid or be due by virtue of an account verified and approved by the judge or court. 5. The rent of the warehouse where the rigging and stores of the vessel have been taken care of, according to contract. 6. The salaries due the captain and crew during its last voyage, which shall be verified by means of the liquidation to be made in view of the lists and of the books of account of the vessel, approved by the chief of the Bureau of Merchant Marine, where there is one, and in his absence by the consul or judge or court. 7. The reimbursement for the goods of the freight which the captain may have sold in order to repair the vessel, provided that the sale has been ordered through a judicial proceedings held with the formalities required in such cases, and recorded in the certificate of registry of the vessel. 8. The part of the price which has not been paid to the said vendor, the unpaid credits for materials and labor in the construction of the vessel, when it has not navigated, and those arising from the repair and equipment of the vessels and from its provisioning with victuals and fuel during the last voyage. In order that the credits provided for in this subdivision may enjoy this preference, they must appear by contracts recorded in the registry of vessels, or if they were contracted for the vessel while on a voyage and said vessel has not returned to the port where it is registered, they must be made with the authorization required for such cases and annotated in the certificate of registration of the vessel. 9. The amount borrowed on bottomry on the hull, keel, tackle, and stores of the vessel before its departure, proven by means of the contract executed according to law and recorded in the registry of vessels; those borrowed during the voyage with the authorization mentioned in the preceding subdivision, satisfying the same requisites; and the insurance premium, proven by the insurance policy or a certificate taken from the books of the broker. 10. The indemnity due the shipper for the value of the goods shipped which were not delivered to the consignees, or for averages suffered for which the vessel is liable, provided that either appear in a judicial or arbitration decision. Bottomry - A contract, in maritime law, by which money is borrowed for a specified term by the owner of a ship for its use, equipment, or repair for which the ship is pledged as collateral. If the ship is lost in the specified voyage or during the limited time, the lender will lose his or her money according to the provisions of the contract. - A contract by which a ship or its freight is pledged as security for a loan, which is to be repaid only in the event that the ship survives a specific risk, voyage, or period. ARTICLE 581. If the proceeds of the sale should not be sufficient to pay all the creditors included in one number or grade, the residue shall be divided among them pro rata. ARTICLE 582. After the bill of the judicial sale at public auction has been executed and inscribed in the registry of vessels, all the other liabilities of the vessel in favor of the creditors shall be considered extinguished. But if the sale should have been voluntary and should have been made while the vessel was on a voyage, the creditors shall preserve their rights against the vessel until it returns to the port of her registry, and three months after the inscription of the sale in the registry of vessel or the arrival.


- � -36ARTICLE 583. If while on a voyage the captain should find it necessary to contract one or more of the obligations mentioned in subdivisions 8 and 9 of Article 580, he shall apply to the judge or court if he is in Philippine territory, and otherwise to the consul of the Republic of the Philippines, should there be one, and, in his absence, to the judge or court or proper local authority, presenting the certificate of the registration sheet treated of in Article 612 and the instruments proving the obligation contracted. The judge or court, the consul, or the local authority, as the case may be, in view of the result of the proceedings instituted, shall make a temporary memorandum of their result in the certificate, in order that it may be recorded in the registry when the vessel returns to the port of its registry, or so that it can be admitted as a legal and preferred obligation in case of sale before its return, by reason of the sale of the vessel on account of a declaration of unseaworthiness. The omission of this formality shall make the captain personally liable for the credits prejudiced on his account. ARTICLE 585. For all purposes of law not modified or restricted by the provisions of this Code, vessels shall continue to be considered as personal property.

TITLE TWO PERSONS WHO TAKE PART IN MARITIME COMMERCE

SECTION ONE - SHIPOWNERS AND SHIP AGENTS ARTICLE 586. The shipowner and the ship agent shall be civilly liable for the acts of the captain and for the obligations contracted by the latter to repair, equip, and provision the vessel, provided the creditor proves that the amount claimed was invested for the benefit of the same. By ship agent is understood the person entrusted with provisioning or representing the vessel in the port in which it may be found. PARTICIPANTS IN MARITIME COMMERCE A. Shipowners and ship agents B. Captains and masters of the vessel C. Officers and crew of the vessel D. Supercargoes E. Pilot

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. The doctrines having reference to the relations between principal and agent cannot be applied in the case of ship agents and ship owners. (Yu Biao v. Osorio) 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 Agent 1. 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) A ship agent, according to Article 586 of the Code of Commerce, is "the person entrusted with the provisioning of a vessel, or who represents her in the port in which she happens to be." Citadel Lines is the local representative in the Philippines of the Oyama Shipping Co., Ltd. Upon arrival of the vessel S/S "St. Lourdes" in Manila, it took charge of the unloading of the cargo and issued cargo receipts (or tally sheets) in its own name, for the purpose of evidencing discharge of cargoes and the conditions thereof from the vessel to the arrastre operators and/or unto barges/lighters, and that claims against the vessel S/S "St. Lourdes" for losses/damages sustained by shipments were in fact filed and processed by respondent Citadel Lines, Inc. Private respondent represents the vessel in the port of Manila and hence is a ship agent within the meaning and context of Article 586 of the Code of Commerce. The ship agent shall also be liable for the indemnities in favor of third persons which arise from the conduct of the captain in the care of the goods which the vessel carried; but he may exempt himself therefrom by abandoning the vessel with all her equipments and the freightage he may have earned during the voyage. (Article 587). In addition, Article 618 states that the captain shall be civilly liable to the ship agent and the ship agent shall be liable to third persons who may have made the contracts with the former (a) for all damages suffered by the vessel and its cargo by reason of want of skill or negligence on his part; if a misdemeanor/crime has been committed he shall be liable in accordance with the Penal Code; (b) for all thefts and robberies committed by the crew. (Switzerland General Insurance v. Ramirez) ANNOTATION by Domingo Lucenario: • ship agent – the person entrusted with provisioning or representing the vessel in the port in which it may be found; it represents her in the port in which she happens to be; although Art. 587 of the Code of Commerce refers to the ship agent only, it does not exclude the owner of the vessel • ship captain – person who governs a vessel that navigates the seas or a ship of large dimensions and importance, although it be engaged I the coastwise trade; for purposes of maritime commerce, the words “captain” and “master” have the same meaning, both being the chiefs or “commanders of ships”; he commands and directs the vessel; he is the general agent of the shipowner, the technical director of the vessel, and usually represents the government of the country under whose flag he navigates • freight – may refer either to the cargo of a ship or the charge for the transportation of the goods • liability for lawful obligations contracted by the captain – the shipowner and the ship agent are civilly liable for the acts of the captain and for the obligations contracted by the latter to repair, equip and provision the vessel, provided the creditor proves that the amount claimed was invested for the benefit of the same • liability for indemnities in favor of third persons – the ship agent shall be civilly liable for the indemnities in favor of third persons which may arise from the conducts of the captain in the care of the goods which he loaded on the vessel, as well as for the safety of passengers transported; shipowners and ship agents are civilly liable for the acts of the Captain (Art. 586) and for the indemnities due the third persons (Art. 587) • responsibility for damages to third persons arising from tort or quasi-delict – the ship agent may be held liable to third persons, who may have contracted with the captain for all damages suffered by the cargo by reason of want of skill or negligence on his part, or for the losses and damages caused by reason of faults committed by the crew • liability for damages in cases of collision by reason of the fault, negligence or lack of skill of the captain, or any member of the complement – if the collision is imputable to both vessels, each one shall suffer its own damages, and both shall be solidarily responsible for the losses or damages occasioned to their cargoes; if a vessel should be forced by a third vessel to collide with another, the owner of the third vessel shall indemnify the losses and damages caused, the captain thereon being civilly liable to said owner


- � -37• the provision of Article 590 reiterates the principle of limited liability embodied in Article 587, though Article 590 contemplates of a situation where the vessel is owned by two or more persons • corollaries to the rule of limited liability – the abandonment amounts to an offer to the injured party of the value of the vessel, of her equipment, and the freight money earned during the voyage; the creditor’s acceptance of the abandonment is compulsory as he cannot refuse it; where the vessel is insured by a marine insurance, abandonment has the effect of the shipowner’s relinquishment to the insurer of his interest in the thing insured ARTICLE 587. The ship agent shall also be civilly liable for the indemnities in favor of third persons which may arise from the conduct of the captain in the care of the goods which he loaded on the vessel; but he may exempt himself therefrom by abandoning the vessel with all her equipments and the freight it may have earned during the voyage. Otherwise known as the “limited liability rule” in maritime law To encourage investment in the shipping industry – before, investors had to invest a lot of money for shipping using boats with sails and it would be unfair to hold them liable for more than what they invested Applies to passengers. • It is well and good that the shipowner be not held criminally liable for such crimes or quasi crimes; but the cannot be excused from liability for the damage and harm which, in consequence of those acts, may be suffered by the third parties who contracted with the captain, in his double capacity of agent and subordinate of the shipowner himself. In maritime commerce, the shippers and passengers in making contracts with the captain do so through the confidence they have in the shipowner who appointed him; they presume that the owner made a most careful investigation before appointing him, and, above all, they themselves are unable to make such an investigation, and even though they should do so, they could not obtain complete security, inasmuch as the shipowner can, whenever he sees fit, appoint another captain instead. (Yu Con v. Ipil) Since the ship agent's or ship owner's liability is merely co-extensive with his interest in the vessel such that a total loss thereof results in its extinction and none of the exceptions to the rule on limited liability being present, the liability of the owners for the loss of the cargo of copra must be deemed to have been extinguished. There is no showing that the vessel was insured in this case. In relation to the CIVIL CODE and COMMON CARRIERS, the SC explained that the presumption of negligence in case of loss, destruction or deterioration still applies. However, the liability is limited by Art 587. Since the Civil Code contains no provisions regulating liability of ship owners or agents in the event of total loss or destruction of the vessel, it is the provisions of the Code of Commerce, more particularly Article 587, that govern in this case. [note: remember, the issue of w/n a CC is liable is different to the extent of its liability, in this case there was NO finding of negligence on the part of the ship owner OR its employees/agents]. (Chua Yek v. IAC) The term "ship agent" as used is broad enough to include the ship owner. This direct liability is moderated and limited by the ship agent's or ship owner's right of abandonment of the vessel and earned freight. This is the universal principle of limited liability under maritime law. The most fundamental effect of abandonment is the cessation of the responsibility of the ship agent/owner. • The rationale: The real and hypothecary nature of the liability of the ship owner or agent in the Maritime Law, Code of Commerce, had its origin in the prevailing conditions of the maritime trade and sea voyages during the medieval ages, attended by innumerable hazards and perils. To offset against these adverse conditions and to encourage ship building and maritime commerce, it was necessary to confine the liability of the owner or agent arising from the operation of a ship to the vessel, equipment, and freight, or insurance, if any, so that if the ship owner or agent abandoned the ship, equipment, and freight, his liability was extinguished. Also, Article 1766 of the Civil Code provides: In all matters not regulated by this Code, the rights and obligations of

common carriers shall be governed by the Code of Commerce and by special laws. Since the Civil Code contains no provisions regulating liability of ship owners or agents in the event of total loss or destruction of the vessel, Code of Commerce (Art 587) will govern here. (Ibid)

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 – collision 4. 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) 4 exceptions to limited liability rule: 1. insurance 2. workmen’s compensation claims 3. repairs before loss 4. negligence of the ship owner and/or captain 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 ¾ of the contents of a cargo containing liquids (Art. 687); and 3. In case of constructive loss of the vessel (Sec. 138, Insurance Code). RIGHT OF ABANDONMENT

SHIPOWNER OR SHIP

AGENT

CONSIGNEE

What may be abandoned

Vessel Goods shipped

Instances

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 ¾ 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); and

3. In case of delay

through the fault of the

carrier (Art. 371).


- � -38

• The term "ship agent" as used in Art 587 is broad enough to

include the ship owner. Pursuant to said provision, therefore, both the ship owner and ship agent are civilly and directly liable for the indemnities in favor of third persons, which may arise from the conduct of the captain in the care of goods transported, as well as for the safety of passengers.

• However, under the same Article (Art 587), this direct liability is moderated and limited by the ship agent's or ship owner's right of abandonment of the vessel and earned freight. This expresses the universal principle of limited liability under maritime law. The most fundamental effect of abandonment is the cessation of the responsibility of the ship agent/owner. In other words, the ship owner's or agent's liability is merely co-extensive with his interest in the vessel such that a total loss thereof results in its extinction. "No vessel, no liability" expresses in a nutshell the limited liability rule. The total destruction of the vessel extinguishes maritime liens as there is no longer any res to which it can attach.

• 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 is hypothecated for such obligations or which stands as the guaranty for their settlement Unseaworthiness may also pertain to the captain and its crew, and may operate to exonerate the shipowner from liability GR is that the limited liability rule will be applied if there is no showing of negligence on the part of the shipowner. (Aboitiz v. General Accident Fire) • In cases involving the limited liability of shipowners, the initial burden of proof of negligence or unseaworthiness rests on the claimants. However, once the vessel owner or any party asserts the right to limit its liability, the burden of proof as to lack of privity or knowledge on its part with respect to the matter of negligence or unseaworthiness is shifted to it. (Monarch Incurance v. CA) • The rule is to the effect that the right of abandonment of vessels, as a legal limitation of a shipowner's liability, does not apply to cases where the injury or average was occasioned by the shipowner's own fault. Art. 587 speaks only of situations where the fault or negligence is committed solely by the captain. Where the shipowner is likewise to be blamed, Art. 587 will not apply, and such situation will be covered by the provisions of the Civil Code on common carrier. (Philamgen v. CA) A shipowner may be held liable for injuries to passengers notwithstanding the exclusively real and hypothecary nature of maritime law if fault can be attributed to the shipowner. (Negros Navigation v. CA) • The liability of a shipowner is limited to the value of the vessel or to the insurance thereon. Despite the total loss of the vessel therefore, its insurance answers for the damages that a shipowner or agent may be held liable for by reason of the death of its passengers. (Vasquez v. CA) If force majeure – insurer bears loss. If not force majeure – negligence of shipowner – insurer bears loss but has right of subrogation against the shipowner.

• Where the shipowner fails to overcome the presumption of negligence, the doctrine of limited liability cannot be applied. (Aboitiz v. New India) The international rule is to the effect that the right of abandonment of vessels, as a legal limitation of a shipowner’s liability, does not apply to cases where the injury or average was occasioned by the shipowner’s own fault. Likewise, the shipowner may be held liable for injuries to passengers notwithstanding the exclusively real and hypothecary nature of maritime law if fault can be attributed to the shipowner. If the shipowner and agent was found to be at fault, the liability is not limited to their interests in the vessel, which in this case was allegedly the insurance proceeds only. They are liable for the full amount of damages as proved in trial. (Aboitiz v. CA) The tort in question is not a civil tort under the Civil Code but a maritime tort resulting in a collision at sea, governed by Articles 826-939 of the Code of Commerce. In case of collision between two vessels imputable to both of them, each vessel shall suffer her own damage and both shall be solidarily liable for the damages occasioned to their cargoes. The shipowner is directly and primarily responsible in tort resulting in a collision at sea, and it may not escape liability on the ground that it exercised due diligence in the selection and supervision of the vessels's officer and crew. This direct responsibility is recognized in Article 618 of the Code of Commerce under which the captain shall be civilly liable to the ship agent, and the latter is the one liable to third persons. To admit the defense of due diligence of a bonus paterfamilias (in the selection and vigilance of the officers and crew) would render nugatory the solidary liability established by Article 827 of the Code of Commerce for the greater protection of injured parties. The owner of a vessel who had caused the same to sail without licensed officers is liable for the injuries caused by the collision over and beyond the value of his vessel; hence, he can not escape liability because of the sinking of the vessel. More so when he expressly declared and stipulated that he assumes full risk and responsibility for any accident, damage or loss. (Manila Steamship v. Abdulhaman) • Atty. Ampil’s opinion: the defense of diligence in the supervision of employees is not available in cases or maritime tort because it is impossible for the shipowner to supervise its employees at sea ARTICLE 588. Neither the shipowner nor the ship agent shall be liable for the obligations contracted by the captain, if the latter exceeds the powers and privileges pertaining to him by reason of his position or conferred upon him by the former. Nevertheless, if the amounts claimed were invested for the benefit of the vessel, the responsibility therefor shall devolve upon its owner or agent. Ship agent – one appointed to manage and operate the vessels of the shipowner, bound to “provisions and victual” them, and to render reports on the operations of the vessels, authorized to appoint subagents remaining responsible to the shipowner. Reason for imposition of liability on owner: to place the primary liability upon the person who has actual control over the conduct of the voyage and who has most capital embarked in the venture, namely, the owner of the ship, leaving him to obtain recourse, as it is very easy to do, from other individuals who have been drawn into the venture as shippers Effect of abandonment: to extinguish the liability of the ship agent Ship agent’s liability is merely co-extensive with his interest in the vessel such that a total loss thereof results in its extinction. The total destruction of the vessel extinguishes a maritime lien, as there is no other any res to which it can attach. ARTICLE 589. If two or more persons should be part owners of a merchant vessel, a partnership shall be presumed as established by the co-owners.

Effects

3. Transfer of ownership

of the vessel from the

s h i p o w n e r t o t h e

shippers or insurer.

4. In case of (2), the

insurer must pay the

insured as if there was

actual total loss of the

vessel.

3. T r a n s f e r o f

ownership on the

g o o d s f r o m t h e

s h i p p e r t o t h e

carrier.

4. Carrier should pay

t h e s h i p p e r t h e

market value of the

goods at the point of

destination.


- � -39This partnership shall be governed by the resolutions of the majority of the members. If the part owners should not be more than two, the disagreement of views, if any, shall be decided by the vote of the member having the largest interest. If the interests are equal, it should be decided by lot. The person having the smallest share in the ownership shall have one vote; and proportionately the other part owners as many votes as they have parts equal to the smallest one. A vessel may not be detained, attached or levied upon in execution in its entirety, for the private debts of a part owner, but the proceedings shall be limited to the interest which the debtor may have in the vessel, without interfering with the navigation. ARTICLE 590. The co-owners of a vessel shall be civilly liable in the proportion of their interests in the common fund, for the results of the acts of the captain, referred to in Article 587. Each co-owner may exempt himself from this liability by the abandonment, before a notary, of the part of the vessel belonging to him. ARTICLE 591. All the part owners shall be liable, in proportion to their respective ownership, for the expenses for repairing the vessel, and for other expenses which are incurred by virtue of a resolution of the majority. They shall likewise be liable in the same proportion for the expenses for the maintenance, equipment, and provisioning of the vessel, necessary for navigation. ARTICLE 592. The resolution of the majority with regard to the repair, equipment, and provisioning of the vessel in the port of departure shall bind the minority, unless the minority members renounce their interests, which must be acquired by the other co-owners, after a judicial appraisement of the value of the portion or portions assigned. The resolutions of the majority relating to the dissolution of the partnership and sale of the vessel shall also be binding on the minority. The sale of the vessel must be made at public auction, subject to the provisions of the law of civil procedure, unless the co-owners unanimously agree otherwise, saying always the right of repurchase and redemption provided for in Article 575. ARTICLE 593. The owners of a vessel shall have preference in her charter over other persons, under the same conditions and price. If two or more of them should claim this right, the one having the greater interest shall be preferred; and should they have equal interests, the matter shall be decided by lot. ARTICLE 594. The co-owners shall elect the manager who is to represent them in the capacity of ship agent. The appointment of director or ship agent shall be revocable at the will of the members. ARTICLE 595. The ship agent, whether he is at the same time the owner of the vessel, or a manager for an owner or for an association of co-owners, must have the capacity to trade and must be recorded in the merchant's registry of the province. The ship agent shall represent the ownership of the vessel, and may, in his own name and in such capacity, take judicial and extrajudicial steps in matters relating to commerce. ARTICLE 596. The ship agent may discharge the duties of captain of the vessel, subject in every case to the provision of Article 609. If two or more co-owners apply for the position of captain, the disagreement shall be decided by a vote of the members; and if the vote should result in a tie, it shall be decided in favor of the co-owner having the larger interest in the vessel. If the interests of the applicants should be equal, and there should be a tie, the matter shall be decided by lot.

ARTICLE 597. The ship agent shall designate and come to terms with the captain, and shall contract in the name of the owners, who shall be bound in all that refer to repairs, details of equipment, armament, provisions of food and fuel, and freight of the vessel, and, in general, in all that relate to the requirements of navigation. ARTICLE 598. The ship agent may not order a new voyage, or make contracts for a new charter, or insure the vessel, without the authorization of its owner or resolution of the majority of the co-owners, unless these powers were granted him in the certificate of his appointment. If he insures the vessel without authorization therefore, he shall be subsidiarily liable for the solvency of the insurer. ARTICLE 599. The ship agent managing for an association shall render to his associates an account of the results of each voyage of the vessel, without prejudice to always having the books and correspondence relating to the vessel and to its voyages at their disposal. ARTICLE 600. After the account of the managing agent has been approved by a relative majority, the co-owners shall pay the expenses in proportion to their interest, without prejudice to the civil or criminal actions which the minority may deem fit to institute afterwards. In order to enforce the payment, the managing agent shall be entitled to an executory action ("accion ejecutiva"), which shall be instituted by virtue of a resolution of the majority, and without further proceedings than the acknowledgment of the signatures of the persons who voted for the resolution. ARTICLE 601. Should there be any profits, the co-owners may demand of the managing agent the amount corresponding to their interests by means of an executory action ("accion ejecutiva"), without any other requisite than the acknowledgment of the signatures on the instrument approving the account. ARTICLE 602. The ship agent shall indemnify the captain for all the expenses he may have incurred with funds of his own or of others, for the benefit of the vessel. ARTICLE 603. Before the vessel sets out to sea the ship agent may at his discretion discharge the captain and members of the crew whose contracts are not for a definite period or voyage, paying them the salaries earned according to their contracts, and without any indemnity whatsoever, unless there is an express and specific agreement in respect thereto. 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) ARTICLE 604. If the captain or any other member of the crew should be discharged during the voyage, they shall receive their salary until they return to the port where the contract was made, unless there should be just cause for the discharge, all in accordance with Article 636 and following of this Code. ARTICLE 605. If the contracts of the captain and members of the crew with the ship agent should be for a definite period or voyage, they may not be discharged until after the fulfillment of their contracts, except by reason of insubordination in serious matters, robbery, theft, habitual drunkenness, or damage caused to the


- � -40vessel or to its cargo through malice or manifest or proven negligence. ARTICLE 606. If the captain should be a co-owner of the vessel, he may not be discharged unless the ship agent returns to him the amount of his interest therein, which, in the absence of agreement between the parties, shall be appraised by experts appointed in the manner established in the law of civil procedure. ARTICLE 607. If the captain who is a co-owner should have obtained the command of the vessel by virtue of a special agreement contained in the articles of association, he may not be deprived of his office except for the causes mentioned in Article 605. ARTICLE 608. In case of the voluntary sale of the vessel, all contracts between the ship agent and the captain shall terminate, reserving to the latter his right to the indemnity which may pertain to him, according to the agreements made with the ship agent. They vessel sold shall remain subject to the security of the payment of said indemnity if, after the action against the vendor has been instituted, the latter is found to be insolvent.

SECTION TWO - CAPTAINS AND MASTERS OF VESSELS ARTICLE 609. Captains, masters or patrons of vessels must be Filipinos, have legal capacity to contract in accordance with this code, and prove the skill, capacity, and qualifications necessary to command and direct the vessel, as established by marine or navigation laws, ordinances, or regulations, and must not be disqualified according to the same for the discharge of the duties of the position. If the owner of a vessel desires to be the captain thereof, without having the legal qualifications therefor, he shall limit himself to the financial administration of the vessel, and shall intrust the navigation to a person possessing the qualifications required by said ordinances and regulations. 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 ship’s 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) The captain of a vessel is a confidential and managerial employee. A master or captain, for purposes of maritime commerce, is one who has command of a vessel. A captain commonly performs three (3) distinct roles: (1) he is a general agent of the shipowner; (2) he is also commander and technical director of the vessel; and (3) he is a representative of the country under whose flag he navigates. In his role as general agent of the shipowner, the captain has authority to sign bills of lading, carry goods aboard and deal with the freight earned, agree upon rates and decide whether to take cargo. The ship captain, as agent of the shipowner, has legal authority to enter into contracts with respect to the vessel and the trading of the vessel, subject to applicable limitations established by statute, contract or instructions and regulations of the shipowner. To the captain is committed the governance, care and management of the vessel. Clearly, the captain is vested with both management and fiduciary functions. A ship's 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. The captain has control of all departments of service in the vessel, and reasonable discretion as to its navigation. It is the right and duty of the captain, in the exercise of sound discretion and in good faith, to do all things with respect to the vessel and its equipment and conduct of the voyage which are reasonably necessary for the protection and preservation of the interests under his charge, whether those be of the shipowner, charterers, cargo owners or of underwriters. In navigating a merchantman, the master must be left free to exercise his own best


- � -41judgment. If the ship captain is convinced, as a reasonably prudent and competent mariner acting in good faith that the shipowner's or ship agent's instructions will result, in the very specific circumstances facing him, in imposing unacceptable risks of loss or serious danger to ship or crew, he cannot casually seek absolution from his responsibility, if a marine casualty occurs, in such instructions. (Inter-Orient v. NLRC) When jettison of cargo occurs it is the duty of the captain to effect the adjustment, liquidation, and distribution of the general average; and his omission to take these steps constitutes an actionable dereliction of duty. For this omission not only is the captain personally liable to the shipper of the jettisoned goods, but the latter may go at once upon the owner, since the captain of the ship is the representative of the owner, and the latter is civilly liable for the acts of the former. The owner of the ship ordinarily has vastly more capital embarked upon a voyage than has any individual shipper of cargo. Moreover, the owner of the ship, in the person of the captain, has complete and exclusive control of the crew and of the navigation of the ship, as well as of the disposition of the cargo at the end of the voyage. It is therefore proper that any person whose property may have been cast overboard by order of the captain should have a right of action directly against the ship's owner for the breach of any duty which the law may have imposed on the captain with respect to such cargo. The evident intention of the Code, taken in all of its provisions, is to place the primary liability upon the person who has actual control over the conduct of the voyage and who has most capital embarked in the venture, namely, the owner of the ship, leaving him to obtain recourse, as it is very easy to do, from other individuals who have been drawn into the venture as shippers. (Standard Oil v. Castelo) The "Don Carlos" failed to comply with the requirements of Rule 18 (a) of the International Rules of the Road, which provides: "(a) When two power-driven vessels are meeting end on, or nearly end on, so as to involve risk of collision, each shall alter her course to starboard, so that each may pass on the port side of the other. “ The "Don Carlos" also violated Rule 28 (c) for it failed to give the required signal of two (2) short horn blasts meaning "I am altering my course to port.” The "Don Carlos" failed to have on board that night a "proper look-out" as required by Rule I (B) of the International Rules of the Road. Under Rule 29 of the same set of Rules, all consequences arising from the failure of the "Don Carlos" to keep a "proper look-out" must be born by the "Don Carlos." The Second Mate Benito German was, immediately before and during the collision, in command of the "Don Carlos." Second Mate German simply did not have the level of experience, judgment and skill essential for recognizing and coping with the risk of collision as it presented itself that early morning when the "Don Carlos," running at maximum speed and having just overtaken the "Don Francisco" then approximately one mile behind to the starboard side of the "Don Carlos," found itself head-on or nearly head-on vis-a-vis the "Yotai Maru." (Smith Bell v. CA) ARTICLE 610. The following powers shall be inherent in the position of captain, master or patron of a vessel: 1. To appoint or make contracts with the crew in the absence of the ship agent, and to propose said crew, should said agent be present; but the ship agent may not employ any member against the captain's express refusal. 2. To command the crew and direct the vessel to the port of its destination, in accordance with the instructions he may have received from the ship agent. 3. To impose, in accordance with the contracts and with the laws and regulations of the merchant marine, and when on board the vessel, correctional punishment upon those who fail to comply with his orders or are wanting in discipline, holding a preliminary hearing on the crimes committed on board the vessel on the seas, which crimes shall be turned over to the authorities having jurisdiction over the same at the first port touched. 4. To make contracts for the charter of the vessel in the absence of the ship agent or of its consignee, acting in accordance with the instructions received and protecting the interests of the owner with utmost care. 5. To adopt all proper measures to keep the vessel well supplied and equipped, purchasing all that may be necessary for the

purpose, provided there is no time to request instruction from the ship agent. 6. To order, in similar urgent cases while on a voyage, the repairs on the hull and engines of the vessel and in its rigging and equipment, which are absolutely necessary to enable it to continue and finish its voyage; but if he should arrive at a point where there is a consignee of the vessel, he shall act in concurrence with the latter. ARTICLE 611. In order to comply with the obligations mentioned in the preceding article, the captain, when he has no funds and does not expect to receive any from the ship agent, shall obtain the same in the successive order stated below: 1. By requesting said funds from the consignee of the vessel or correspondents of the ship agent. 2. By applying to the consignees of the cargo or to those interested therein. 3. By drawing on the ship agent. 4. By borrowing the amount required by means of a loan on bottomry. 5. By selling a sufficient amount of the cargo to cover the sum absolutely indispensable for the repair of the vessel and to enable it to continue its voyage. In these two last cases he must apply to the judicial authority of the port, if in the Philippines, and to the consul of the Republic of the Philippines if in a foreign country, and where there is none, to the local authority, proceeding in accordance with the provisions of Article 583, and with the provisions of the law of civil procedure. ARTICLE 612. The following obligations shall be inherent in the office of captain: 1. To have on board before starting on a voyage a detailed inventory of the hull, engines, rigging, spare-masts, tackle, and other equipment of the vessel; the royal or the navigation certificate; the roll of the persons who make up the crew of the vessel, and the contracts entered into with them; the lists of passengers; the bill of health; the certificate of the registry proving the ownership of the vessel and all the obligations which encumber the same up to that date; the charter parties or authenticated copies thereof; the invoices or manifests of the cargo, and the memorandum of the visit or inspection by experts, should it have been made at the port of departure. 2. To have a copy of this code on board. 3. To have three folioed and stamped books, placing at the beginning of each one a memorandum of the number of folios it contains, signed by the maritime authority, and in his absence by the competent authority. In the first book, which shall be called "log book," he shall enter day by day the condition of the atmosphere, the prevailing winds, the courses taken, the rigging carried, the power of the engines used in navigation, the distances covered, the maneuvers executed, and other incidents of navigation; he shall also enter the damage cause may be, as well as the impairment and damage suffered by cargo, and the effect and importance of the jettison, should there be any; and in cases of serious decisions which require the advice or a meeting of the officers of the vessel, or even of the crew and passengers, he shall record the decisions adopted. For the information indicated he shall make use of the binnacle book and of the steam of engine book kept by the engineer. In the second book called the "accounting book," he shall record all the amounts collected and paid for the account of the vessel, entering specifically article by article, the source of the collection and the amounts spent for provisions, repairs, acquisitions of equipment or goods, fuel, food, outfits, wages, and other expenses of whatever nature they may be. He shall furthermore enter therein a list of all the members of the crew, stating their domiciles, their wages and salaries, and the amounts they may have received on account, directly or by delivery to their families. In the third book, called "freight book," he shall record the loading and discharge of all the goods, stating their marks and packages, names of the shippers and of the consignees, ports of loading and unloading, and the freightage they give. In this same book he shall


- � -42record the names and places of sailing of the passengers, the number of packages in their baggage, and the price of passage. 4. Before receiving cargo, to make with the officers of the crew and two experts, if required by the shippers and passengers, an examination of the vessel, in order to ascertain whether it is water-tight, with the rigging and engines in good condition, and with the equipment required for good navigation, preserving under his responsibility a certificate of the memorandum of his inspection, signed by all those who may have taken part therein. The experts shall be appointed, one by the captain of the vessel and another by those who request its examination, and in case of disagreement a third shall be appointed by the marine authority of the port or by the authority, exercising his functions. 5. To remain constantly on board the vessel with the crew while the cargo is being taken on board and to carefully watch the stowage thereof; not to consent to the loading of any merchandise or matter of a dangerous character, such as inflammable or explosive substances, without the precautions which are recommended for their packing, handling and isolation; not to permit the carriage on deck of any cargo which by reason of its arrangement, volume, or weight makes the work of the sailors difficult, and which might endanger the safety of the vessel; and if, on account of the nature of the merchandise, the special character of the shipment, and principally the favorable season in which it is undertaken, merchandise may be carried on deck, he must hear the opinion of the officers of the vessel and have the consent of the shippers and of the ship agent. 6. To demand a pilot at the expense of the vessel whenever required by the navigation, and principally when he has to enter a port, canal, or river, or has to take a roadstead or anchoring place with which neither he nor the officers and crew are acquainted. 7. To be on deck on reaching land and to take command on entering and leaving ports, canals, roadsteads, and rivers, unless there is a pilot on board discharging his duties. He shall not spend the night away from the vessel except for serious causes or by reason of official business. 8. To present himself, when making a port in distress, to the maritime authority if in the Philippines and to the consul of the Republic of the Philippines if in a foreign country, before twenty-four hours have elapsed, and to make a statement of the name registry, and port of departure of the vessel, of its cargo, and the cause of arrival which declaration shall be visaed by the authority or the consul, if after examining the same it is found to be acceptable, giving the captain the proper certificate proving his arrival in distress and the reasons therefor. In the absence of the maritime authority or of the consul, the declaration must be made before the local authority. 9. To take the necessary steps before the competent authority in order to record in the certificate of the vessel in the registry of vessels the obligations which he may contract in accordance with Article 583. 10. To place under good care and custody all the papers and belongings of any members of the crew who might die on the vessel, drawing up a detailed inventory, in the presence of passengers, or, in their absence, of members of the crew as witnesses. 11. To conduct himself according to the rules and precepts contained in the instructions of the ship agent, being liable for all that which he may do in violation thereof. 12. To inform the ship agent from the port at which the vessel arrives, of the reason of his arrival, taking advantage of the semaphore, telegraph, mail, etc., as the case may be; to notify him of the cargo he may have received, stating the names and domiciles of the shippers, freightage earned, and amounts borrowed on bottomry loan; to advise him of his departure, and of any operation and date which may be of interest to him. 13. To observe the rules with respect to situation, lights and maneuvers in order to avoid collisions. 14. To remain on board, in case the vessel is in danger, until all hope to save it is lost, and before abandoning it, to hear the officers of the crew, abiding by the decision of the majority; and if the boats are to be taken to, he shall take with him, before anything else, the books and papers, and then the articles of most

value, being obliged to prove, in case of the loss of the books and papers, that he did all he could to save them. 15. In case of wreck, to make the proper protest in due form at the first port of arrival, before the competent authority or the Philippine consul, within twenty-four hours, specifying therein all the incidents of the wreck, in accordance with subdivision 8 of this article. 16. To comply with the obligations imposed by the laws and regulations on navigation, customs, health, and others. • study Article s 610-612 for the bar

PILOT A person duly qualified, and licensed, to conduct a vessel into or out of ports, or in certain waters. The term generally connotes a person taken on board at a particular place for the purpose of conducting a ship through a river, road or channel, or from a port. Master pro hac vice for the time being in the command and navigation of the ship. While in exercising his functions a pilot is in sole command of the ship and supersedes the master for the time being in the command and navigation of the ship, the master does not surrender his vessel to the pilot and the pilot is not the master. There are occasions when the master may and should interfere and even displace the pilot, as when the pilot is obviously incompetent or intoxicated (Far Eastern Shipping Company vs. CA). Compulsory Pilotage – States possessing harbors have enacted laws or promulgated rules requiring vessels approaching their ports to take on board pilots licensed under the local laws. (Notes and Cases on the Law on Transportation and Public Utilities, Aquino, T. & Hernando, R.P. 2004 ed. p. 518) Liablity of Pilot GENERAL RULE: On compulsory pilotage grounds, the Harbor Pilot is responsible for damage to a vessel or to life or property due to his negligence. EXCEPT: 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) A pilot, in maritime law, is a person duly qualified, and licensed, to conduct a vessel into or out of ports, or in certain waters. The term includes both (1) those whose duty it is to guide vessels into or out of ports, or in particular waters and (2) those entrusted with the navigation of vessels on the high seas. However, it is more generally understood as 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. Under English and American authorities, generally speaking, the pilot supersedes the master for the time being in the command and navigation of the ship, and his orders must be obeyed in all matters connected with her navigation. He becomes the master pro hac vice and should give all directions as to speed, course, stopping and reversing, anchoring, towing and the like. And when a licensed pilot is employed in a place where pilotage is compulsory, it is his duty to insist on having effective control of the vessel, or to decline to act as pilot.

Captain Master

General agent of shipowner Technical director Representative of the flag of the government Found in ocean vessels

Found in smaller boats


- � -43The purpose of these laws providing for compulsory pilotage is to create a body of seamen thoroughly acquainted with the harbor, to pilot vessels seeking to enter or depart, and thus protect life and property from the dangers of navigation. (Far Eastern v. CA) ARTICLE 613. A captain who navigates for freight in common or on shares may not make any separate transaction for his own account; and should he do so, the profit which may accrue shall belong to the other persons interested, and the losses shall be borne by him exclusively. ARTICLE 614. A captain who, having made an agreement to make a voyage, fails to perform his undertaking, without prevented by fortuitous accident or force majeure, shall indemnify for all the losses which he may cause without prejudice to the criminal penalties which may be proper. ARTICLE 615. Without the consent of the agent, the captain cannot have himself substituted by another person; and should he do so, besides being liable for all the acts of the substitute and bound to the indemnities mentioned in the foregoing articles, the captain as well as the substitute may be discharged by the ship agent. ARTICLE 622. If while on a voyage the captain should learn of the appearance of privateers or men of war against his flag, he shall be obliged to make the nearest neutral port, inform his agent or shippers, and await an occasion to sail under convoy, or until the danger is over or he has received express orders from the ship agent or the shippers. “privateer“- warships ARTICLE 623. If he should be attacked by a privateer, and, after having tried to avoid the encounter and having resisted the delivery of the effects of the vessel or its cargo, they should be forcibly taken away from him, or he should be obliged to deliver them, he shall make an entry thereof in his freight book and shall prove the fact before the competent authority at the first port he touches. After the force majeure has been proved, he shall be exempted from liability. ARTICLE 624. A captain whose vessel has gone through a hurricane or who believes that the cargo has suffered damages or averages, shall make a protest thereon before the competent authority at the first port he touches, within twenty-four hours following his arrival and shall ratify it within the same period when he arrives at his destination, immediately proceeding with the proof of the facts, and he may not open the hatches until after this has been done. The captain shall proceed in the same manner, if, the vessel having been wrecked; he is saved alone or with part of his crew, in which case he shall appear before the nearest authority, and make a sworn statement of facts. The authority or the consul shall verify the said facts receiving sworn statements of the members of the crew and passengers who may have been saved; and taking such other steps as may assist in arriving at the facts he shall make a statement of the result of the proceedings in the log book and in that of the sailing mate, and shall deliver to the captain the original record of the proceedings, stamped and folioed, with a memorandum of the folios, which he must rubricate, in order that it may be presented to the judge or court of the port of destination. The statement of the captain shall be accepted if it is in accordance with those of the crew and passengers; if they disagree, the latter shall be accepted, always saying proof to the contrary. ARTICLE 625. The captain, under his personal responsibility as soon as he arrives at the port of destination, should get the necessary permission from the health and customs officers, and perform the other formalities required by the regulations of the

administration, delivering the cargo without any defalcation, to the consignee, and in a proper case, the vessel, rigging, and freightage to the ship agent. If by reason of the absence of the consignee or on account of the nonappearance of a legal holder of the bills of lading, the captain should not know to whom he is to legally make the delivery of the cargo, he shall place it at the disposal of the proper judge or court or authority, in order that he may determine what is proper with regard to its deposit, preservation and custody. ARTICLE 626. In order to be a sailing mate it shall be necessary: 1. To have the qualifications required by the marine or navigation laws or regulations. 2. Not to be disqualified in accordance therewith for the discharge of his duties. ARTICLE 617. The captain may not contract loans on respondentia secured by the cargo; and should he do so, the contracts shall be void. Neither may he borrow money on bottomry for his own transactions, except on the portion of the vessel he owns, provided no money has been previously borrowed on the whole vessel, and there does not exist any other kind of lien or obligation chargeable against the vessel. If he may do so, he must state what interest he has in the vessel. In case of violation of this article, the principal, interest, and costs shall be for the personal account of the captain, and the ship agent may furthermore discharge him. ARTICLE 618. The captain shall be civilly liable to the ship agent, and the latter to the third persons who may have made contracts with the former; 1. For all the damages suffered by the vessel and its cargo by reason of want of skill or negligence on his part. If a misdemeanor or crime has been committed, he shall be liable in accordance with the Penal Code. 2. For all the thefts committed by the crew, reserving his right of action against the guilty parties. 3. For the losses, fines, and confiscations imposed an account of violation of customs, police, health, and navigation laws and regulations. 4. For the losses and damages caused by mutinies on board the vessel or by reason of faults committed by the crew in the service and defense of the same, if he does not prove that he made timely use of all his authority to prevent or avoid them. obligations pertaining to him in accordance with Articles 610 and 612. 6. For those arising by reason of his going out of his course or taking a course which he should not have taken without sufficient cause, in the opinion of the officers of the vessel, at a meeting with the shippers or supercargoes who may be on board. No exceptions whatsoever shall exempt him from this obligation. 7. For those arising by reason of his voluntarily entering a port other than that of his destination, outside of the cases or without the formalities referred to in Article 612. 8. For those arising by reason of non-observance of the provisions contained in the regulations on situation of lights and maneuvers for the purpose of preventing collisions. ARTICLE 619. The captain shall be liable for the cargo from the time it is delivered to him at the dock or afloat alongside the at the port of loading, until he delivers it on the shore or on the discharging wharf at the port of unloading, unless the contrary has been expressly agreed upon. ARTICLE 620. The captain shall not be liable for the damages caused to the vessel or to the cargo by force majeure; but he shall always be so for those arising through his own fault, no agreement to the contrary being valid. Neither shall he be personally liable for the obligations he may have contracted for the repair, equipment, and provisioning of the vessel, which shall devolve upon the ship agent, unless the former


- � -44has expressly bound himself personally or has signed a bill of exchange or promissory note in his name.

SECTION THREE – OFFICERS AND CREW OF VESSELS ARTICLE 621. A captain who borrows money on the hull, engine, rigging or tackle of the vessel, or pledges or sells merchandise or provisions outside of the cases and without the formalities prescribed in this Code, shall be liable for the principal, interests, and costs, and shall indemnify for the damages he may cause. He who commits fraud in his accounts shall pay the amount defrauded and shall be subject to the provisions of the Penal Code. OFFICERS AND CREW 1. Sailing Mate/First Mate 2. Second Mate 3. Engineers 4. Crew F 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) ARTICLE 627. The sailing mate, as the second chief of the vessel, and unless the agent orders otherwise, shall take the place of the captain in cases of absence, sickness, or death, and shall then assume all his powers, duties, and responsibilities. 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) F 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) ARTICLE 628. The sailing mate must provide himself with charts of the seas in which he will navigate with the astronomical tables and instruments for observation which are in use and which are necessary for the discharge of his duties, being liable for the accidents which may arise by reason of his omission in this regard. ARTICLE 629. The sailing mate shall particularly and personally keep a book, folioed and stamped on all its pages, denominated "Binnacle Book" with a memorandum at the beginning stating the number of folios it contains, signed by the competent authority, and shall enter therein daily the distance, the course travelled, the variations of the needle, the leeway, the direction and force of the wind, the condition of the atmosphere and of the sea, the rigging set, the latitude and longitude observed, the number of furnace heated, the steam pressure, the number of revolutions, and under the title "incidents," the maneuvers made, the meeting with other vessels, and all the details and incidents which. may occur during the voyage. • remember this for the bar: “Binnacle Book” ARTICLE 630. In order to change the course and to take the one most convenient for a good voyage of the vessel, the sailing mate shall come to an agreement with the captain. If the latter should object, the sailing mate shall state to him the proper observations in the presence of the other officers of the sea. If the captain

should still insist on his negative decision, the sailing mate shall make the proper protest, signed by him and by one other officer, in the log book, and shall obey the captain, who alone shall be responsible for the consequences of his decision. ARTICLE 631. The sailing mate shall be responsible for all the damages caused to the vessel and the cargo by reason of his negligence or want of skill without prejudice to the criminal liability which may arise, if a felony or misdemeanor has been committed. ARTICLE 632. The following shall be the obligations of the second mate: 1. To watch over the preservation of the hull and rigging of the vessel, and to take charge of the preservation of the tackle and equipment which make up her outfit, suggesting to the captain the repairs necessary and the replacement of the goods and implements which are rendered useless and are lost. 2. To take care that the cargo is well arranged, keeping the vessel always ready for maneuver. 3. To preserve order, discipline, and good service among the crew, requesting the necessary orders and Instructions of the captain, and giving him prompt information of any occurrence in which the intervention of his authority may be necessary. 4. To assign to each sailor the work he is to do on board, in accordance with the instruction received and to see that it is promptly and accurately carried out. 5. To take charge under inventory of the rigging and all the equipment of the vessel, if it should be laid up, unless the ship agent has ordered otherwise. With regard to engineers the following rules shall govern: 1. In order to be taken on board as a marine engineer forming part of the complement of a merchant vessel, it shall be necessary to have the qualifications which the laws and regulations require, and not be disqualified in accordance therewith for the discharge of his duties. Engineers shall be considered officers of the vessel but they shall have no authority or intervention except in matters referring to the motor apparatus. 2. When there are two or more engineers on board a vessel, one of them shall be the chief, and the other engineers and all the personnel of the engines shall be under his orders; he shall also have charge of the motor apparatus, the spare parts, the instruments and tools pertaining thereto, the fuel, the lubricating material and, finally, whatever is entrusted to an engineer on board a vessel. 3. He shall keep the engines and boilers in good condition and state of cleanliness, and shall order what may be proper in order that they may always be ready to work with regularity, being liable for the accidents or damages which his negligence or want of skill may cause to the motor apparatus, to the vessel and to the cargo, without prejudice to the criminal liability which may be proper if there has been a felony or misdemeanor. 4. He shall not make any change in the motor apparatus, or proceed to repair the averages he may have noticed in the same, or change the normal speed of its movement without the prior authorization of the captain., to whom, if he should object to their being made, he shall state the proper observations in the presence of the other engineers or off icers; and if , notwithstanding this, the captain should insist on his objection, the chief engineer shall make the proper protests, entering the same in the engine book, and shall obey the captain, who, alone shall be responsible for the consequences of his decision. 5. He shall inform the captain of any average which may occur in the motor apparatus, and shall advise him whenever it may be necessary to stop the engines for some time, or when any other incident occurs in his department of which the captain should be immediately informed, besides frequently advising him of the consumption of fuel and lubricating material. 6. He shall keep a book or registry called the "engine book," in which shall be entered all the date referring to the work of the engines, such as, for example, the number of furnaces heated, the vacuum in the condenser, the temperature, the degree of


- � -45saturation of the water in the boilers the consumption of fuel and lubricating material, and under the heading of "noteworthy occurrences," the averages and maladjustments which occur in the engines and boilers, the causes thereof and the means employed to repair the same likewise, the force and direction of the wind, the rigging set and the speed of the vessel shall be stated, taking the information from the Binnacle Book. ARTICLE 633. The second mate shall take 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 responsibility. 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. F Third in command F 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. F 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) ARTICLE 634. The captain may make up the crew of his vessel with such number of men as he may consider proper, and in the absence of Filipino sailors, he may take on foreigners residing in the country, the number thereof not to exceed one-fifth of the crew. If in foreign ports the captain should not find a sufficient number of Filipino sailors, he may complete the crew with foreigners, with the consent of the consul or marine authorities. The agreement which the captain may make with the members of the crew and others who go to make up the complement of the vessel, to which reference is made in Article 612, must be reduced to writing in the account book, without the intervention of a notary public or clerk of court ("escribano"), signed by the parties thereto and visaed by the marine authority if they be executed in Philippine territory or by the consuls or consular agents of the Republic of the Philippines if executed abroad, stating therein all the obligations which each one contracts and all the rights he acquires said authorities taking care that these obligations and rights are recorded in a clear and definite manner which give no room for doubts or claims. The captain shall take care to read to them the articles of this Code which concern them, stating in said document that they were read. If the book contains the requisites prescribed in Article 612, and there should not appear any signs of alterations in its entries, it shall be admitted as evidence in questions which may arise between the captain and the crew with respect to the agreements contained therein and the amounts paid on account of the same. Every member of the crew may demand of the captain a copy, signed by the latter, of the agreement and of the liquidation of his wages, as they appear in the book. ARTICLE 635. A seaman who has been contracted to serve on a vessel may not rescind his contract or fail to comply therewith

except by reason of a legitimate impediment which may have happened to him. Neither may he transfer from the service of one vessel to another without obtaining the written permission of the captain of the vessel on which he may be. If, without obtaining said permission, the seaman who has signed for one vessel should sign for another one, the second contract shall be void, and the captain may choose between forcing him to fulfill the service to which he first bound himself, or at his expense to look for a person to substitute him. Furthermore, he shall lose the wages earned on his first contract, to the benefit of the vessel for which he had signed. A captain who, knowing that a seaman is in the service of another vessel, should have made a new agreement with him without having required of him the permission referred to in the preceding paragraphs, shall be subsidiarily responsible to the captain of the vessel to which the seaman first belonged, for that part of the indemnity, referred to in the third paragraph of this article, which the seaman may not be able to pay. Crew The aggregate of seamen who man a ship, or the ship’s company. Hired by the ship agent, where he is present and in his absence, the captain hires them, preferring Filipinos, and in their absence, he may take in foreigners, but not exceeding 1/5 of the crew. (Art. 634) Classes of Seaman’s Contracts 1. By the voyage; 2. By the month; and 3. By share of profits or freightage. Just Causes for the Discharge of Seaman While Contract Subsists 1. Perpetration of a crime; 2. Repeated insubordination, want of discipline; 3. Repeated incapacity and negligence; 4. Habitual drunkenness; 5. Physical incapacity; 6. Desertion. (Art. 637) Rules in case of Death of a Seaman The seaman’s heirs are entitled to payment as follows: 1. If death is natural: a. compensation up to time of death if engaged on wage b. if by voyage - half of amount if death occurs on voyage out; and full, if on voyage in c. if by shares - none, if before departure; full, if after departure 2. if death is due to defense of vessel - full payment; 3. if captured in defense of vessel - full payment; 4. if captured due to carelessness - wages up to the date of the capture. (Art. 645) Complement of the Vessel All persons on board, from the captain to the cabin boy, necessary for the management, maneuvers, and service, thus including the crew, the sailing mates, engineers, stokers and other employees on board not having specific designations. Does not include the passengers or the persons whom the vessel is transporting. ARTICLE 643. If the vessel and her cargo should be totally lost, by reason of capture or wreck, all rights shall be extinguished, both as regards the crew to demand any wages whatsoever, and as regards the ship agent to recover the advances made. If a portion of the vessel or of the cargo, or of both, should be saved, the crew engaged on wages, including the captain, shall retain their rights on the salvage, so far as they go, on the remainder of the vessel as well as on the amount of the freightage of the cargo saved; but sailors who are engaged on shares shall not have any right whatsoever on the salvage of the hull, but only on the portion of the freightage saved. [If they should have worked to recover the remainder of the shipwrecked vessel they shall be given from the amount of the salvage an award in proportion of


- � -46the efforts made and to the risks, encountered in order to accomplish the salvage.] [repealed by Salvage Law] ARTICLE 644. A seaman who falls sick shall not lose his right to wages during the voyage, unless the sickness is the result of his own fault. At any rate, the costs of the attendance and cure shall be defrayed from the common funds, in the form of a loan. If the sickness should come from an injury received in the service or defense of the vessel, the seaman shall be attended and cured at the expense of the common funds deducting, before anything else, from the proceeds of the freightage the cost of the attendance and cure. ARTICLE 645. If a seaman should die during the voyage, his heirs will be given the wages earned and not received according to his contract and the cause of his death, namely — If he died a natural death and was engaged on wages, that which may have been earned up to the date of his death shall be paid. If the contract was for a fixed sum for the whole voyage, half the amount earned shall be paid if the seamen died on the voyage out, and the whole amount if he died on the return voyage. And if the contract was on shares and death occurred after the voyage was begun, the heirs shall be paid the entire portion due the seaman; but if the latter died before the departure of the vessel from the port, the heirs shall not be entitled to claim anything. If death occurred in the defense of the vessel, the seaman shall be considered as living, and his heirs shall be paid, at the end of the voyage, the full amount of wages or the integral part of the profits which may be due him as to others of his class. In the same manner, the seaman captured while defending the vessel shall be considered present so as to enjoy the same benefits as the rest; but should he have been captured on account of carelessness or other accident not related to the service, he shall only receive the wages due up to the day of his capture. “Shares” – refers to interest in the freight ARTICLE 648. By the complement of a vessel shall be understood all the persons on board, from the captain to the cabin boy, necessary for the management, maneuvers, and service, and therefore, the complement shall include the crew, the sailing mates, engineers, stokers and other employees on board not having specific designations; but it shall not include the passengers or the persons whom the vessel is transporting. ARTICLE 636. If there is no fixed period for which a seaman has been contracted he may not be discharged until the end of the return voyage to the port where he enlisted. ARTICLE 637. Neither may the captain discharge a seaman during the time of his contract except for just cause, the following being considered as such: 1. The perpetration of a crime which disturbs order on the vessel. 2. Repeated insubordination, want of discipline, or non-fulfillment of the service. 3. Repeated incapacity and negligence in the fulfillment of the service he should render. 4. Habitual drunkenness. 5. Any occurrence which incapacitates the seaman to perform the work entrusted to him, with the exception of that provided in Article 644. 6. Desertion. The captain may, however, before getting out on a voyage and without giving any reason, refuse to permit a seaman whom he may have engaged to go on board, and leave him on land, in which case he will be obliged to pay him his wages as if he had rendered services. This indemnity shall be paid from the funds of the vessel if the captain should have acted for reasons of prudence and in the interest of the safety and good services of the farmer. Should this not be the case, it shall be paid by the captain personally.

After the voyage has begun, during the same, and until the conclusion thereof, the captain may not abandon any member of his crew on land or on sea, unless, by reason of some crime, his imprisonment and delivery to the competent authority in the first port touched should be proper, a matter obligatory for the captain. ARTICLE 638. If, after the crew has been engaged, the voyage is revoked by the will of the ship agent or of the charterers before or after the vessel has put to sea, or if the vessel is for the same reason given a destination different from that fixed in the agreement with the crew, the latter shall be indemnified on account of the rescission of the contract, according to the cases follows: 1. If the revocation of the voyage should be decided upon before the departure of the vessel from the port, each sailor engaged shall be given one month's salary, besides what may be due him, in accordance with his contract, for the services rendered to the vessel up to the date of the revocation. 2. If the agreement should have been for a fixed amount for the whole voyage, that which may be due for said month and days shall be determined in proportion to the approximate number of days the voyage should have lasted, in the judgment of experts, in the manner established in the law of Civil Procedure; and if the proposed voyage should be of such short duration that it is calculated at approximately one month, the indemnity shall be fixed for fifteen days, discounting in all cases the sums advanced. 3. If the revocation should take place after the vessel has put to sea, the seamen engaged for a fixed amount for the voyage shall receive in full the salary which may have been offered them as if the voyage had terminated; and those engaged by the month shall receive the amount corresponding to the time they might have been on board and to the time they may require to arrive at the port of destination, the captain being obliged, furthermore, to pay the seamen in both cases, the passage to the said port or to the port of sailing of the vessel, as may be convenient for them. 4. If the ship agent or the charterers of the vessel should give it a destination different from that fixed in the agreement, and the members of the crew should not agree thereto, they shall be given by way of indemnity half the amount fixed in case No. 1, besides what may be owed them for the part of the monthly wages corresponding to the days which have elapsed from the date of their agreements. If they accept the change, and the voyage, on account of the greater distance or of other reasons, should give rise to an increase of wages, the latter shall be adjusted privately or through amicable arbitrators in case of disagreement. Even though the voyage should be shortened to a nearer point, this shall not give rise to a reduction in the wages agreed upon. If the revocation or change of the voyage should come from the shippers or charterers, the agent shall have a right to demand of them the indemnity which may be justly due. ARTICLE 640. The following shall be just causes for the revocation of the voyage. 1. A declaration of war or interdiction of commerce with the power to whose territory the vessel was bound. 2. The blockade of the port of its destination, or the breaking out of an epidemic after the agreement. 3. The prohibition to receive in said port the goods which make up the cargo of the vessel. 4. The detention or embargo of the same by order of the government, or for any other reason independent of the will of the ship agent. 5. The inability of the vessel to navigate. ARTICLE 641. If, after a voyage has been begun, any of the first three causes mentioned in the foregoing article should occur, the sailors shall be paid at the port which the captain may deem advisable to make for the benefit of the vessel and cargo, according to the time they may have served thereon; but if the vessel is to continue its voyage, the captain and the crew may mutually demand the enforcement of the contract.


- � -47In case of the occurrence of the fourth cause, the crew shall continue to be paid half wages, if the agreement is by month; but if the detention should exceed three months, the contract shall be rescinded and the crew shall be paid what they should have earned according to the contract if the voyage had been concluded. And if the agreement should be for a fixed sum for the voyage, the contract must be complied within the terms agreed upon. In the fifth case, the crew shall have no other right than to collect the wages earned; but if the disability of the vessel should have been caused by the negligence or lack of skill of the captain, engineer, or sailing mate, they shall indemnify the crew for the damages suffered, always without prejudice to the criminal liability which may be proper. ARTICLE 642. If the crew have been engaged on shares, they shall not be entitled, by reason of the revocation, delay, or greater extension of the voyage, to anything but the proportionate part of the indemnity which way be paid into the common funds of the vessel by the persons liable for said occurrences. ARTICLE 647. The officers and the crew of the vessel shall be free from all obligations if they deem it proper, in the following cases: 1. If, before beginning the voyage, the captain attempts to change it, or a naval war with the power to which the vessel was destined occurs. 2. If a disease should break out and be officially declared an epidemic in the port of destination. 3. If the vessel should change owner or captain. ARTICLE 648. By the complement of a vessel shall be understood all the persons on board, from the captain to the cabin boy, necessary for the management, maneuvers, and service, and therefore, the complement shall include the crew, the sailing mates, engineers, stokers and other employees on board not having specific designations; but it shall not include the passengers or the persons whom the vessel is transporting.

SECTION FOUR SUPERCARGOES ARTICLE 649. Supercargoes shall discharge on board the vessel the administrative duties which the ship agent or the shippers may have assigned to them; they shall keep an account and record of their transactions in a book which shall have the same conditions and requisites as required for the accounting book of the captain, and they shall respect the latter in his capacity as chief of the vessel. The powers and responsibilities of the captain shall cease, when there is a supercargo, with regard to that part of the administration legitimately conferred upon the latter, but shall continue in force for all acts which are inseparable from his authority and office. Supercargo – an agent of the owner of goods shipped as cargo on a vessel, who has charge of the cargo on board, sells the same to the best advantage in the foreign market, buys a cargo to be brought back on the return voyage of the ship, and comes home with it. - 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) ARTICLE 650. All the provisions contained in the second section of Title III, Book II, with regard to capacity, manner of making contracts, and liabilities of factors, shall be applicable to supercargoes. ARTICLE 651. Supercargoes may not, without special authorization or agreement, make any transaction for their own account during the voyage, with the exception of the ventures which, in accordance with the custom of the port of destination, they are permitted to do.

Neither shall they be permitted to invest in the return trip more than the profits from the ventures, unless there is an express authorization from the principals. TITLE THREE - SPECIAL CONTRACTS OF MARITIME COMMERCE

SECTION ONE - CHARTER PARTIES PART I - FORMS AND EFFECTS OF CHARTER PARTIES

ARTICLE 652. A charter party must be drawn in duplicate and signed by the contracting parties, and when either does not know how or is not able to do so, by two witnesses at his request. The charter party shall contain, besides the conditions freely stipulated, the following circumstances: 1. The kind, name, and tonnage of the vessel. 2. Its flag and port of registry. 3. The name, surname, and domicile of the captain. 4. The name, surname, and domicile of the ship agent, if the latter should make the charter party. 5. The name, surname, and domicile of the charterer; and if he states that he is acting by commission, that of the person for whose account he makes the contract. 6. The port of loading and unloading. 7. The capacity, number of tons or the weight or measurement which they respectively bind themselves to load and to transport, or whether the charter party is total. 8. The freightage to be paid, stating whether it is to be a fixed amount for the voyage or so much per month, or for the space to be occupied, or for the weight or measure of the goods of which the cargo consists, or in any other manner whatsoever agreed upon. 9. The amount of primage to be paid to the captain. 10. The days agreed upon for loading and unloading. 11. The lay days and extra lay days to be allowed and the demurrage to be paid for each of them. ARTICLE 653. If the cargo should be received without the charter party having been signed, the contract shall be understood as executed in accordance with what appears in the bill of lading, the sole evidence of title with regard to the cargo for determining the rights and obligations of the ship agent, of the captain, and of the charterer. ARTICLE 654. The charter parties executed with the intervention of a broker, who certifies to the authenticity of the signatures of the contracting parties because they were signed in his presence, shall be full evidence in court; and if they should be conflicting, that which accords with one which the broker must keep in his registry, if kept in accordance with law, shall govern. The contracts shall also be admitted as evidence, even though a broker has not taken part therein, if the contracting parties acknowledge the signatures to be the same as their own. If no broker has intervened in the charter party and the signatures are not acknowledged, doubts shall be decided by what is provided for in the bill of lading and in the absence thereof, by the proofs submitted by the parties. ARTICLE 655. Charter parties executed by the captain in the absence of the ship agent shall be valid and effective, even though in executing them he should have acted in violation of the orders and instructions of the ship agent or shipowner; but the latter shall have a right of action against the captain for indemnification of damages. ARTICLE 656. If in the charter party the time in which the loading and unloading are to take place is not stated, the usages of the port where these acts take place shall be observed. After the stipulated or the customary period has passed, and there is no express proviso in the charter party fixing the indemnity for the delay, the captain shall be entitled to demand demurrage for the lay days and extra lay days which may have elapsed in loading and unloading. SPECIAL CONTRACTS OF MARITIME COMMERCE


- � -481. Charter party 2. Bill of lading 3. Contract of transportation of passengers on sea voyages 4. Loan on bottomry 5. Loan on respondentia 6. Marine insurance 2 more common types of contracts: (1) charter party a) affreightment – charterer leases the space 1. time charter 2. voyage charter b) bareboat – shipowner relinquishes possession and command of the vessel charterer because owner pro hac vice – “for one time only” (2) bill of lading a) negotiable b) non-negotiable General Rule: venue can be agreed upon by the parties Exception: Sweet Lines v. Teves: A common carrier engaged in inter-island shipping may not stipulate thru a condition printed at the back of passage tickets that all actions arising out of the contract of carriage should be filed only in a particular province/city to the exclusion of all others when such condition will go against the policy of providing convenience to plaintiffs in pursuing their claims and promoting the ends of justice. Charter party – contract by virtue of which the owner or the agent of a vessel binds himself to transport merchandise or persons for a fixed price; contract by virtue of which the owner or the agent of the vessel leases for a certain price the whole or a portion of the vessel for the transportation of the goods or persons from one port to another o classes or charter party: (1) as to extent of vessel hired (a) total – where the whole of the vessel is chartered or (b) partial – where only a part of the vessel is chartered; the charterer does not, as a rule, acquire the right to fix the date when the vessel should depart, unless such right is expressly granted in the contract (2) as to time (a) until a fixed day – for a definite number of days or month (b) for a voyage – either outgoing or return, or round trip (3) as to freightage (a) for a fixed amount for the whole cargo (b) for a fixed rate per ton (c) for so much per month 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 vessel’s navigation, including the master and the crew, who thereby become the charter’s servants. It transforms a common carrier into a private carrier. The charterer becomes the owner of the vessel pro hac vice, just for that one particular purpose only. Because the 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. Generally, a private carriage is undertaken by special agreement and the carrier does not hold himself out to carry goods for the general public. In this instant case, VSI did not offer its services to the general public. It carried passengers or goods only for those it chose under a "special contract of charter party." Consequently, the rights and obligations of VSI and NSC, including their respective liability for damage to the cargo, are determined primarily by stipulations in their contract of private carriage or charter party and not by the stringent provisions of the Civil Code on common carriers. In an action against a private carrier for loss of, or injury to, cargo, the burden is on the plaintiff to prove that the carrier was negligent or unseaworthy. The burden of proving negligence or a breach of that duty rests on plaintiff and proof of loss of, or damage to, cargo while in the carrier's possession does not cast on it the burden of proving proper care and diligence on its part or that the loss occurred from an excepted cause in the contract or bill of lading. Under the parties’ Contract of Voyage Charter Hire NSC must prove that the damage to its shipment was caused by VSI's willful negligence or failure to exercise due diligence in making MV Vlasons I seaworthy and fit for holding, carrying and safekeeping the cargo. (Vlasons Shipping v. CA) Respondent carrier, in the ordinary course of business, operates as a common carrier, transporting goods indiscriminately for all persons. When petitioner chartered the vessel M/V "Sun Plum", the ship captain, its officers and compliment were under the employ of the shipowner and therefore continued to be under its direct supervision and control. Hardly then can we charge the charterer, a stranger to the crew and to the ship, with the duty of caring for his cargo when the charterer did not have any control of the means in doing so. This is evident in the present case considering that the steering of the ship, the manning of the decks, the determination of the course of the voyage and other technical incidents of maritime navigation were all consigned to the officers and crew who were screened, chosen and hired by the shipowner. (Planter Products v. CA) Coastwise’s contract with the consignee is one of affreightment. Pag-Asa Sales Inc. only leased 3 of Coastwise’s vessels, in order to carry cargo from one point to another, but the possession, command and navigation of the vessels remained with Coastwise. Therefore, Coastwise, by the contract of affreightment, was not converted into a private carrier, but remained a common carrier. ICoastwise Lighterage v. CA) As regards the goods damaged or lost during unloading, the charterer is liable therefor, having assumed this activity under the charter party "free of expense to the vessel." The difficulty is that Transcontinental has not been impleaded in these cases and so is beyond our jurisdiction. The liability imposable upon it cannot be borne by Maritime which, as a mere agent, is not answerable for injury caused by its principal. The charterer did not represent itself as a carrier and indeed assumed responsibility only for the unloading of the cargo, i.e, after the goods were already outside the custody of the vessel. In supervising the unloading of the cargo and issuing Daily Operations Report and Statement of Facts indicating and describing the day-to-day discharge of the cargo, Maritime acted in representation of the charterer and not of the vessel. It thus cannot be considered a ship agent. As a mere charterer's agent, it cannot be held solidarily l iable with Transcontinental for the losses/damages to the cargo outside the custody of the vessel. (Maritime Agencies v. CA)


- � -49Petitioner Litonjua did not place into the record of this case a copy of the charter party covering the M/V Dufton Bay. We must assume that petitioner Litonjua was aware of the nature of a bareboat or demise charter and that if petitioner did not see fit to include in the record a copy of the charter party, which had been entered into by its principal, it was because the charter party and the provisions thereof were not supportive of the position adopted by petitioner Litonjua in the present case, position diametrically opposed to the legal consequence of a bareboat charter. Treating Fairwind as owner pro hac vice, petitioner Litonjua having failed to show that it was not such, we believe and so hold that petitioner Litonjua, as Philippine agent of the charterer, may be held liable on the contract of employment between the ship captain and the private respondent. (Litonjua v. CA) An owner who retains possession of the ship, though the hold is the property of the charterer, remains liable as carrier and must answer for any breach of duty as to the care, loading or unloading of the cargo. Assuming that in the present case, the charter party is a demise or bareboat charter, then Philipp Brothers is liable to Puromines, Inc., subject to the terms and conditions of the sales contract. On the other hand, if the contract between respondent and the owner of the vessel MV "Liliana Dimitrova" was merely that of affreightment, then it cannot be held liable for the damages caused by the breach of contract of carriage, the evidence of which is the bills of lading. (Puromines v. Ca) • primage - no longer a gratuity to the master, unless especially stipulated; but it belongs to the owners or freighters, and is nothing but an increase of the freight rate • demurrhage – sum which is fixed by the contract of carriage, or which is allowed, as reimbursement to the owner of a ship for the detention of his vessel beyond the number of days allowed by the charter party for loading and unloading or for sailing o only an extended freight or reward to the vessel, in compensation for the earnings she is improperly caused to lose o term has been applied to a claim for damages for failure of the consignee to accept delivery of the goods • 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 Freightage - The price or compensation paid for the transportation of goods by a carrier. Freight is also applied to the goods transported by such carriers. As defined, a contract of affreightment is a contract with the shipowner to hire his ship or part of it, for the carriage of goods, and generally takes the form either of a charter party or a bin of lading. The charter party may be oral, in wchih case the terms thereof, not having been in writing, shall be those embodied in the bill of lading. (Market Development v. IAC)

PERSONS WHO MAY MAKE A CHARTER 1. 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 latter’s interests. (Art.609) REQUISITES OF A VALID CHARTER PARTY 1. Consent of the contracting parties 2. Existing vessel which should be placed at the disposition of the shipper 3. Freight 4. Compliance with Art. 652 of the Code of Commerce A 'charter-party' is defined as a contract by which an entire ship, or some principal part thereof, is let by the owner to another person for a specified time or use; a contract of affreightment by which the owner of a ship or other vessel lets the whole or a part of her to a merchant or other person for the conveyance of goods, on a particular voyage, in consideration of the payment of freight. Contract of affreightment may either be time charter, wherein the vessel is leased to the charterer for a fixed period of time, or voyage charter, wherein the ship is leased for a single voyage. In both cases, the charter-party provides for the hire of the vessel only, either for a determinate period of time or for a single or consecutive voyage, the ship owner to supply the ship's store, pay for the wages of the master of the crew, and defray the expenses for the maintenance of the ship. (Tabacalera v. North Front) A charter party is a contract by which an entire ship, or some principal part thereof, is let by the owner to another person for a specified time or use; a contract of affreightment is one by which the owner of a ship or other vessel lets the whole or part of her to a merchant or other person for the conveyance of goods, on a particular voyage, in consideration of the payment of freight. A contract of affreightment may be either time charter, wherein the leased vessel is leased to the charterer for a fixed

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.

T h e n e w o w n e r i s n o t

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

p o s s e s s i o n , c o m m a n d a n d

navigation to charterer

The vessel owner retains

possession, command and

navigation of the ship

Common carrier is converted to

private carrier.

C o m m o n c a r r i e r i s n o t

converted to a private carrier.


- � -50period of time, or voyage charter, wherein the ship is leased for a single voyage. In both cases, the charter-party provides for the hire of the vessel only, either for a determinate period of time or for a single or consecutive voyage, the ship owner to supply the ship's store, pay for the wages of the master of the crew, and defray the expenses for the maintenance of the ship. Under a demise or bareboat charter on the other hand, the charterer mans the vessel with his own people and becomes, in effect, the owner for the voyage or service stipulated, subject to liability for damages caused by negligence. If the charter is a contract of affreightment, which leaves the general owner in possession of the ship as owner for the voyage, the rights and the responsibilities of ownership rest on the owner. The charterer is free from liability to third persons in respect of the ship. (Caltex v. Sulpicio) Transhipment, in maritime law, is defined as "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." The fact of transhipment is not dependent upon the ownership of the transporting ships or conveyances or in the change of carriers but rather on the fact of actual physical transfer of cargo from one vessel to another. (Magellan Manufacturing v. CA) The act of the charterer in sub-chartering the vessel, in spite of a categorical prohibition may be a violation of a contract, but the owner’s right of recourse is against the original charterer. In a sublease agreement, there are two distinct leases involved that is, the principal lease and the sublease. The personality of the lessee qua lessee does not disappear; his rights and obligations vis-à-vis the lessor are not passed on to nor acquired by the sublessee. The lessee-sublessor is not an agent of the lessor nor is the lessor an agent of the lessee-sublessor. The sublessee has no right or authority to pay the sublease rentals to the lessor, said rentals being due and payable to the lessee-sublessor. Petitioner, as owner of the vessel, has no lien over the cargo. In a bareboat charter, not only the entire capacity of the ship is let but the ship itself, and the possession is passed to the charterer. The entire control and management of it is given up to him. The general owner loses his lien for freight, but the lien itself is not destroyed; the charterer is substituted in his place, in whose favor the lien continues to exist when goods are taken on freight. The general owner, however, has no remedy for the charter of his vessel but his personal action on the covenants of the charter party. It is a contract in which he trusts in the personal credit of the charterer. Where the charter constitutes a demise of the ship and the charterer is the owner for the voyage, and that is the kind of charter party involved in the instant case, the general owner has no lien on the cargo for the hire of the vessel, in the absence of an express provision therefor as in the case at bar. Moreover, even on the assumption that petitioner had a lien on the cargo for unpaid freight, the same was deemed waived when the goods were unconditionally released to the consignee at the port of destination. A carrier has such a lien only while it retains possession of the goods, so that delivery of the goods to the consignee or a third person terminates, or constitutes a waiver of, the lien. In the present case, the cargo of cement was unloaded from the vessel and delivered to the consignee on October 23, 1980, without any oral or written notice or demand having been made on SMCSI for unpaid freight on the cargo. Consequently, after the lapse of thirty (30) days from the date of delivery, the cargo of cement had been released from any maritime lien for unpaid freight. (Ouano v. CA)

PART 2 - RIGHTS AND OBLIGATIONS OF SHIPOWNERS ARTICLE 669. The shipowner or the captain shall observe in charter parties the capacity of the vessel or that expressly designated in its registry, a difference greater than 2 per cent between that stated and her true capacity not being permissible. If the shipowner or the captain should contract to carry a greater amount of cargo than the vessel can carry in view of her tonnage, they shall indemnify the shippers whose contracts they do not fulfill for the losses they may have caused when by reason of their default, according to the following cases, viz:

If the vessel has been chartered by one shipper only, and there should appear to be an error or fraud in her capacity, and the charterer should not wish to rescind the contract, when he has a right to do so, the freightage shall be reduced in proportion to the cargo which the vessel can not receive, the person from whom the vessel is chartered being furthermore obliged to indemnify the charterer for the losses he may have caused him. If, on the contrary there should be several charter parties, and by reason of want of space all the cargo contracted for cannot be loaded, and none of the charterers desires to rescind the contract, preference shall be given to the person who has already loaded and arranged the freight in the vessel, and the rest shall take the places corresponding to them in the order of the dates of their contracts. Should there be no priority, the charterers may load, if they wish, in proportion to the amounts of weight or space for which each may have contracted, and the person from whom the vessel was chartered shall be obliged to indemnify them for losses and damages. Rights and Obligations of Parties

ARTICLE 670. If the person from whom the vessel is chartered, after receiving a part of the freight, should not find sufficient to make up at least three-fifths of the amount which the vessel may hold, at the price he may have fixed, he may substitute for the transportation another vessel inspected and declared suitable for the same voyage, the expenses of transfer and the increase in the price of the charter, should there be any, being for his account. Should he not be able to make this change, he shall undertake the voyage at the time agreed upon; and should no time have been fixed, within fifteen days from the time the loading began, unless otherwise stipulated.

SHIPOWNER OR SHIP

AGENT

CHARTERER

1. If the vessel is chartered

wholly, not to accept cargo

from others;

2. To observe represented

capacity;

3. T o u n l o a d c a r g o

clandestinely placed

4. To subst i tute another

vessel if load is less 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

o r b l o c k a d e . ( A r t s .

669-678)

1. To pay the agreed charter

price;

2. To p a y f r e i g h t a g e o n

unboarded cargo;

3. To pay losses to others for

loading uncontracted cargo

and illicit cargo;

4. To wait if the vessel needs

repair;

5. To p a y e x p e n s e s f o r

deviation. (Arts. 679-687)


- � -51If the owner of the part of the freight already loaded should procure some more at the same price and under similar or proportionate conditions to those accepted for the freight received, the person from whom the vessel is chartered or the captain can not refuse to accept the rest of the cargo; and should he do so, the shipper shall have a right to demand that the vessel put to sea with the cargo which it may have on board. ARTICLE 671. After three-fifths of the vessel has been loaded, the person from whom she is chartered may not, without the consent of the charterers or shippers, substitute the vessel designated in the charter party by another one, under the penalty of making himself thereby liable for all the losses and damages occurring during the voyage to the cargo of those who did not consent to the change. ARTICLE 672. If the vessel has been chartered in whole, the captain may not, without the consent of the charterer, accept cargo from any other person; and should he do so, said charterer may oblige him to unload it and to indemnify him for the losses suffered thereby. ARTICLE 673. The person from whom the vessel is chartered shall be liable for all the losses caused to the charterer by reason of the voluntary delay of the captain in putting to sea, according to the rules prescribed, provided he has been requested, notarially or judicially, to put to sea at the proper time. ARTICLE 674. If the charterer should carry to the vessel more cargo than that contracted for, the excess may be admitted in accordance with the price stipulated in the contract, if it can be well stowed without injuring the other shippers; but if in order to load it, the vessel would be thrown out of trim, the captain must refuse it or unload it at the expense of its owner. In the same manner, the captain may, before leaving the port, unload merchandise clandestinely placed on board, or transport them, if he can do so with the vessel in trim, demanding by way of freightage the highest price which may have been stipulated for said voyage. ARTICLE 675. If the vessel has been chartered to receive the cargo in another port, the captain shall appear before the consignee designated in the charter party; and, should the latter not deliver the cargo to him, he shall inform the charterer and wait his instructions, the lay days agreed upon or those allowed by custom in the port beginning to run in the meantime, unless there is an express, agreement to the contrary. Should the captain not receive an answer within the time necessary therefor, he shall make efforts to find freight; and should he not find any after the lay days and extra lay days have elapsed, he shall make a protest and return to the port where the charter was made. The charterer shall pay the freightage in full, discounting that which may have been earned on the merchandise which may have been carried on the voyage out or on the return trip, if carried for the account of third persons. The same shall be done if a vessel, having been chartered for the round trip, should not be given any cargo on its return. ARTICLE 676. The captain shall lose the freightage and shall indemnify the charterers if the latter should prove, even against the certificate of inspection, if one has been made at the port of departure, that the vessel was not in a condition to navigate at the time of receiving the cargo. ARTICLE 677. The charter party shall subsist if a declaration of war or a blockade should take place during the voyage, the captain not having any instructions from the charterer. In such case the captain must proceed to the nearest safe and neutral port, requesting and awaiting orders from the shipper, and the expenses and salaries paid during the detention shall be paid as general average.

If, by orders of the shipper, the cargo should be discharged at the port of arrival, the freightage for the voyage out shall be paid in full. ARTICLE 678. If the time necessary, in the opinion of the judge or court, to receive the orders of the shipper should have elapse, without the captain having received any instructions, the cargo shall be deposited, and it shall be liable for the payment of the freightage and expenses on its account during the delay, which shall be paid from the proceeds of the part first sold. 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 ship for the detention of his vessel beyond the number of days allowed by the charter party for loading or unloading or for sailing. Deadfreight – the amount paid by or recoverable from a charterer of a ship for the portion of the ship’s capacity the latter contracted for but failed to occupy. 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. 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)

PART 3 - OBLIGATIONS OF CHARTERERS ARTICLE 679. The charterer of an entire vessel may sub-charter the whole or part thereof on such terms as he may consider most convenient, the captain not being allowed to refuse to receive on board the freight delivered by the second charterers, provided that the conditions of the first charter are not change, and that the price agreed upon is paid in full to the person from whom the vessel is chartered, even though the full cargo is not embarked, with the limitation established in the next article. ARTICLE 680. A charterer who does not complete the full cargo he bound himself to ship shall pay the freightage of the amount he fails to ship, if the captain does not take other freight to complete the load of the vessel, in which case the first charterer shall pay the difference, should there be any. ARTICLE 681. If the charterer should load goods different from those stated at the time of executing the charter party, without the knowledge of the person from whom the vessel was chartered or of the captain, and should thereby give rise to losses, by reason of confiscation, embargo, detention, or other causes, to the person from whom the vessel was chartered or to the shippers, the person giving rise thereto shall be liable with the value of his shipment and furthermore with his property, for the full indemnity to all those injured through his fault. ARTICLE 682. If the merchandise should have been shipped for the purpose of illicit commerce, and were taken on board with the knowledge of the person from whom the vessel was chartered or of the captain, the latter, jointly with the owner of the same, shall be liable for all the losses which may be caused the other shippers; and even though it may have been stipulated, they can not demand any indemnity whatsoever from the charterer for the damaged caused to the vessel.


- � -52ARTICLE 683. In case of making a port to repair the hull, machinery, or equipment of the vessel, the shippers must await until the vessel is repaired, being permitted to unload it at their own expense should they deem it proper. If, for the benefit of the cargo subject to deterioration, the shippers or the court, or the consul, or the competent authority in a foreign country, should order the merchandise to be unloaded, the expenses of unloading and reloading shall be for the account of the former. ARTICLE 684. If the charterer, without the occurrence of any of the cases of force majeure mentioned in the foregoing article, should wish to unload his merchandise before arriving at the port of destination, he shall pay the full freightage, the expenses of the arrival made at his request, and the losses and damages caused the other shippers, should there be any. ARTICLE 685. In charters for transportation of general freight, any of the shippers may unload the merchandise before the beginning of the voyage, paying one-half of the freightage, the expense of stowing and restowing the cargo, and any other damage which for his reason he may cause the other shippers. ARTICLE 686. After the vessel has been unloaded and the cargo placed at the disposal of the consignee, the latter must immediately pay the captain the freightage due and the other expenses for which said cargo may be liable. The primage must be paid in the same proportion and at the same time as the freightage, all the changes and modifications to which the latter should be subject also governing the former. ARTICLE 687. The charterers and shippers may not abandon merchandise damaged on account of inherent defect or fortuitous event, for the payment of the freightage and other expenses. The abandonment shall be proper, however, if the cargo should consist of liquids and they have leaked out, nothing remaining in the containers but one-fourth part of their contents. PART 4 - TOTAL OR PARTIAL RESCISSION OF CHARTER PARTIES ARTICLE 688. A charter party may be rescinded at the request of the charterer: 1. If before loading the vessel he should not agree with that stated in the certificate of tonnage, or if there should be an error in the statement of the flag under which she sails. 2. If the vessel should not be placed at the disposal of the charterer within the period and in the manner agreed upon. 3. If after the vessel has put to sea, she should return to the port of departure, on account of risk from pirates, enemies, or bad weather, and the shippers should agree to unload her. In the second and third cases the person from whom the vessel was chartered shall indemnify the charterer for the voyage out. 4. If the charter should have been made by the months, the charterers shall pay the full freightage for one month, if the voyage is for a port in the same waters, and for two months, if for a port in different waters. From one port to another of the Philippines and adjacent islands, the freightage for one month only shall be paid. 5. If the vessel should make a port during the voyage in order to make urgent repairs, and the charterers should prefer to dispose of the merchandise. When the delay does not exceed thirty days, the shippers shall pay the full freightage for the voyage out. Should the delay exceed thirty days, they shall only pay the freightage in proportion to the distance covered by the vessel. • Not the same concept as rescission; it is actually resolution under Art. 1191CC ARTICLE 689. At the request of the person from whom the vessel is chartered the charter party may be rescinded: 1. If the charterer, at the termination of the extra lay days, does not place the cargo alongside the vessel. In such case the charterer

must pay half the freight stipulated, besides the demurrage due for the lay days and extra lay days. 2. If the person from whom the vessel was chartered should sell it before the charterer has begun to load it, and the purchaser should load it for his own account. In such case the vendor shall indemnify the charterer for the losses he may suffer. If the new owner of the vessel should not load it for his own account, the charter party shall be respected, and the vendor shall indemnify the purchaser if the former did not inform him of the charter pending at the time of making the sale. ARTICLE 690. The charter party shall be rescinded and all actions arising therefrom shall be extinguished, if, before the vessel puts to sea from the port of departure, any of the following cases should occur: 1. A declaration of war or interdiction of commerce with the power to whose ports the vessel was to make its voyage. 2. A condition of blockade of the port of destination of said vessel, or the breaking out of an epidemic after the contract was executed. 3. The prohibition to receive at the said port the merchandise constituting the cargo of the vessel. 4. An indefinite detention, by reason of an embargo of the vessel by order of the government, or for any other reason independent of the will of the ship agent. 5. The inability of the vessel to navigate, without fault of the captain or ship agent. The unloading shall be made for the account of the charterer. ARTICLE 691. If the vessel cannot put to sea on account of the closing of the port of departure or any other temporary cause, the charter shall remain in force, with neither one of the contracting parties having a right to claim damages. The subsistence and wages of the crew shall be considered as general average. During the interruption, the charterer may at the proper time and for his own account, unload and load the merchandise, paying demurrage if he delays the reloading after the cause for the detention has ceased. • example of temporary cause - storm ARTICLE 692. A charter party shall be partially rescinded, unless there is an agreement to the contrary, and the captain shall only be entitled to the freightage for the voyage out, if, by reason of a declaration of war, closing of ports, or interdiction of commercial relations during the voyage, the vessel should make the port designated for such a case in the instructions of the charterer. Rescission of Charter Party

At charterer’s

request

(Art 688)

At shipowner’s

request

(Art. 689)

Fortuitous causes

(Art. 690)


- � -53

PART 5 - PASSENGERS ON SEA VOYAGES

ARTICLE 693. If the passage price has not been agreed upon, the judge or court shall summarily fix it, after a declaration of experts. ARTICLE 694. Should the passenger not arrive on board at the time fixed, or should leave the vessel without permission from the captain when the latter is ready to leave the port, the captain may continue the voyage and demand the full passage price. ARTICLE 695. The right to passage, if issued to a specified person, may not be transferred without the consent of the captain or of the consignee. ARTICLE 696. If before beginning the voyage the passenger should die, his heirs shall only be obliged to pay half of the fare agreed upon. If the expenses of subsistence are included in the price stipulated, the judge or court, after hearing experts if he considers it necessary, shall fix the amount which has to be left for the benefit of the vessel. Should another passenger be received in the place of the deceased, no payment shall be made by said heirs. ARTICLE 697. If before the voyage is begun it is suspended through the exclusive fault of the captain or ship agent, the passengers shall have the right to a refund of their fares and to recover losses and damages; but if the suspension is due to fortuitous events, or to force majeure, or to any other cause independent of the captain or ship agent, the passengers shall only be entitled to the return of the fare. ARTICLE 698. In case a voyage already begun should be interrupted, the passengers shall be obliged to pay the fare in proportion to the distance covered, without right to recover for losses and damages if the interruption is due to fortuitous event or to force majeure, but with a right to indemnity if the interruption should have been caused by the captain exclusively. If the interruption should be caused by the disability of the vessel, and a passenger should agree to await the repairs, he may not be required to pay any increased price of passage, but his living expenses during the stay shall be for his own account. In case of delay in the departure of the vessel, the passengers have the right to remain on board and to be furnished with food for the account of the vessel unless the delay is due to fortuitous events or to force majeure. If the delay should exceed ten days, passengers requesting the same shall be entitled to the return of the fare; and if it is due exclusively to the fault of the captain or ship agent, they may also demand indemnity for losses and damages. A vessel exclusively devoted to the transportation of passengers must take them directly to the port or ports of destination, no matter what the number of passengers may be, making all the stops indicated in its itinerary.

ARTICLE 699. If the contract is rescinded, before or after the commencement of the voyage, the captain shall have a right to claim payment of what he may have furnished the passengers. ARTICLE 700. In all matters pertaining to the preservation of order and discipline on board the vessel passengers shall be subject to the orders of the captain, without any distinction whatsoever. ARTICLE 701. The convenience or the interest of the passengers shall not obligate or empowers the captain to stand in shore or enter places which may take the vessel out of her course, or to remain in the ports he must or in under necessity of touching for a period longer than that required by the needs of navigation. ARTICLE 702. In the absence of an agreement to the contrary, it shall be understood that the subsistence of the passengers during the voyage is included in the price of the passage; but should it be for the account of the latter, the captain shall be under obligation, in case of necessity, to furnish the supply of food necessary for their sustenance at a reasonable price. ARTICLE 703. A passenger shall be considered a shipper insofar as the goods he carries on board are concerned, and the captain shall not be responsible for what the former may keep under his immediate and special custody, unless the damage arises from an act of the captain or of the crew. • hand-carry = depositary ARTICLE 704. The captain, in order to collect the passage-money and expenses of sustenance, may retain the goods belonging to the passenger, and in case of the sale of the same he shall be given preference over other creditors acting the same way as in the collection of freightage. ARTICLE 705. In case of the death of a passenger during the voyage, the captain shall be authorized, with regard to the body, to take the steps required by the circumstances, and shall carefully take care of the papers and goods which may be on board belonging to the passenger, observing the provisions of case No. 10 of Article 612 with regard to members of the crew.

PART 6 - BILLS OF LADING ARTICLE 706. The captain of the vessel and the shipper shall have the obligation of drawing up the bill of lading in which shall be stated: 1. The name, registry, and tonnage of the vessel. 2. The name of the captain and his domicile. 3. The port of loading and that of unloading. 4. The name of the shipper. 5. The name of the consignee, if the bill of lading is issued in the name of a specified person. 6. The quantity, quality, number of packages and marks of the merchandise. 7. The freightage and the primage stipulated. The bill of lading may be issued to bearer, to order, or in the name of a specified person, and must be signed within twenty-four hours after the cargo has been received on board, the shipper being entitled to demand the unloading at the expense of the captain should the latter not sign it, and, in every case, the losses and damages suffered thereby. Principal Differences between charter party and bill of lading:

1. By abandoning

the char te r and

paying half of the

freightage;

2. Error in tonnage

or flag;

3. Failure to place

the vessel at the

charterer’s disposal;

4. Return of the

v e s s e l d u e t o

pirates, enemies or

bad weather;

5. Arrival at a port

for repairs.

1. If the extra lay

d a y s t e r m i n a t e

without the cargo

b e i n g p l a c e d

alongside the vessel;

2. Sale by the owner

of the vessel before

l o a d i n g b y t h e

charterer;

1. War or

interdiction of

commerce;

2. Blockade;

3. Prohibition to

receive cargo;

4. Embargo; and

5. Inability of the

vessel to navigate.

Charter Party Bill of Lading


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An on board bill of lading is one in which it is stated that the goods have been received on board the vessel which is to carry the goods, whereas a received for shipment bill of lading is 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. Received for shipment bills of lading are issued whenever conditions are not normal and there is insufficiency of shipping space. An on board bill of lading is issued when the goods have been actually placed aboard the ship with every reasonable expectation that the shipment is as good as on its way. It is, therefore, understandable that a party to a maritime contract would require an on board bill of lading because of its apparent guaranty of certainty of shipping as well as the seaworthiness of the vessel which is to carry the goods. (Magellan Manufacturing v. CA) Bills of lading, in modern jurisdiction, are not those issued by masters of vessels alone; they now comprehend all forms of transportation, whether by sea or land, and include the receipts for cargo transported. As comprehending all methods of transportation, a bill of lading may be defined as a written acknowledgment of the receipt of goods and an agreement to transport and to deliver them at a specified place to a person named or on his order. Such instruments are sometimes called 'shipping receipts,' 'forwarders' receipts,' and 'receipts for transportation'. The designation, however, is not material, and neither is the form of the instrument. If it contains an acknowledgment by the carrier of the receipt of goods for transportation, it is, in legal effect, a bill of lading. (Mindanao Bus v. CIR) ARTICLE 707. Four true copies of the original bill of lading shall be made, and all of them shall be signed by the captain and the shipper. Of these, the shipper shall keep one and send another to the consignee; the captain shall take two, one for himself and another for the ship agent. There may also be drawn up as many copies of the bill of lading as may be considered necessary by the person interested; but when they are issued to order or to bearer, they shall be stated in all the copies, be they the first four or the subsequent ones, the destination of each one, stating whether it is for the agent, for the captain, for the shipper, or for the consignee. If the copy sent to the latter should have a duplicate, this circumstance and the fact that it is not valid except in default of the first one must be stated therein. ARTICLE 708. Bills of lading issued to bearer and sent to the consignee shall be transferable by actual delivery of the instrument; and those issued to order, by virtue of an indorsement. In either case, the person to whom the bill of lading is transferred shall acquire all the rights and actions of the transferor or indorser with regard to the merchandise mentioned in the same. ARTICLE 709. A bill of lading drawn up in accordance with the provisions of this title shall be proof as between all those interested in the cargo and between the latter and the insurers, proof to the contrary being reserved for the latter. ARTICLE 710. If the bills of lading do not agree, and no change or erasure can be observed in any of them, those possessed by the shipper or consignee signed by the captain shall be proof against the captain or ship agent in favor of the consignee or shipper; and those possessed by the captain or ship agent signed by the shipper shall be proof against the shipper or consignee in favor of the captain or ship agent.

ARTICLE 711. The legitimate holder of a bill of lading who fails to present it to the captain of the vessel before the unloading obliging the latter thereby to unload it and place it in deposit, shall be responsible for the expenses of warehousing and other expenses arising therefrom. ARTICLE 712. The captain may not by himself change the destination of the merchandise. In admitting this change at the instance of the shipper, he must first take up the bill of lading which he may have issued, under pain of being liable for the cargo to the legitimate holder of the same. ARTICLE 713. If before the delivery of the cargo a new bill of lading should be demanded of the captain, on the allegation that the failure to present the previous ones is due to their loss or to any other just cause, he shall be obliged to issue it, provided that security for the value of the cargo is given to his satisfaction, but without changing the consignment, and stating therein the circumstances prescribed in the last paragraph of Article 707, under penalty, should he not so state, of being held liable for said cargo if improperly delivered through his fault. ARTICLE 714. If before the vessel puts to sea the captain should die or should cease to hold his position through any cause, the shippers shall have the right to demand of the new captain the ratification of the first bills of lading, and the latter must do so, provided that all the copies previously issued be presented or returned to him, and it should appear from all examination of the cargo that they are correct. The expenses arising from the examination of the cargo shall be defrayed by the ship agent, without prejudice to the right of action of the latter against the first captain if he ceased to be such through his own fault. Should said examination not be made, it shall be understood that the new captain accepts the cargo as it appears from the bills of lading issued. ARTICLE 715. Bills of lading will give rise to a most summary action or to judicial, compulsion ("accion sumarisima o de apremios"), according to the case, for the delivery of the cargo and the payment of the freightage and the expenses thereby incurred. ARTICLE 716. If several persons should present bills of lading issued to bearer or to order, indorsed in their favor, demanding the same merchandise, the captain shall prefer, in making delivery the person who presents the copy first issued, except when the latter one was issued on proof of the loss of the first, and both are presented by different persons. In such case, as well as when only second subsequent copies, issued without this proof, are presented, the captain shall apply to the judge or court, so that he may order the deposit of the merchandise and their delivery, through him, to the proper person. • remedy where 2 or more bills issued: the captain shall deliver the goods to the holder of the bill which was first issued • if the reason why the second bill of lading was issued is that the first one was lost: the captain must bring an action in court i.e., a complaint in interpleader ARTICLE 717. The delivery of the bill of lading shall effect the cancellation of all the provisional receipts of prior date given by the captain or his subordinates for partial deliveries of the cargo which may have been made. ARTICLE 718. After the cargo has been delivered the bill of lading which the captain signed, or at least the copy by reason of which the delivery is made, shall be returned to him, with the receipt for the merchandise mentioned therein. The delay on the part of the consignee shall make him liable for the damages which such delay may cause the captain. Requisites for delivery of goods: (1) the bill of lading covering such goods must be surrendered (2) the one receiving the goods must issue a receipt for the same

Entire or complete contract A consensual contract is entered into, which can be dissolved by means of indemnity for losses and damages

Like a private receipt which the captain gives to accredit that such and such goods belong to such and such persons show the existence of a real contract, for the reason that its effects exist only after the delivery of t


- � -55 The inclusion of the unmanifested cargoes in the Bill of Lading does not satisfy the requirement of the aforequoted sections of the Tariff and Customs Code. Nowhere in the said section is the presentation of a Bill of Lading required, but only the presentation of a Manifest containing a true and accurate description of the cargoes. While a manifest is a declaration of the entire cargo, a bill of lading is but a declaration of a specific part of the cargo and is a matter of business convenience based exclusively on a contract. The object of a manifest is to furnish the customs officers with a list to check against, to inform our revenue officers what goods are being brought into the country, and to provide a safeguard against goods being brought into this country on a vessel and then smuggled ashore. In short, while a bill of lading is ordinarily merely a convenient commercial instrument designed to protect the importer or consignee, a manifest of the cargo is absolutely essential to the exportation or importation of property in all vessels, to impose upon the owners and officers of such vessel an imperative obligation to submit lists of the entire loading of the ship in the prescribed form, to facilitate the labors of the customs and immigration officers and to defeat any attempt to make use of such vessels to secure the unlawful entry of persons or things into the country. The law imposes the absolute obligation, under penalty for failure, upon every vessel from a foreign port to have "on board complete written or typewritten manifests of all her cargo, signed by the master". Where the law requires a manifest to be kept or delivered, it is not complied with unless the manifest is true and accurate. (Macondray v. Comm. Of Cusotms) Petitioner admits that it "received the bill of lading immediately after the arrival of the shipment". Having been afforded an opportunity to examine the said document, petitioner did not immediately object to or dissent from any term or stipulation therein. It was only six months later that petitioner sent a letter to private respondent saying that it could not accept the shipment. Petitioner's inaction for such a long period conveys the clear inference that it accepted the terms and conditions of the bill of lading. After accepting the bill of lading, receiving notices of arrival of the shipment, failing to object thereto, petitioner) cannot now deny that it is bound by the terms in the bill of lading. If it did not intend to be bound, petitioner would not have waited for six months to lapse before finally bringing the matter to private respondent's attention. In the case at bar, the prolonged failure of petitioner to receive and discharge the cargo from the private respondent's vessel constitutes a violation of the terms of the bill of lading. It should thus be liable for demurrage to the former. Demurrage is merely an allowance or compensation for the delay or detention of a vessel. The apparent discrepancy was a result of the variance of the dates when the two demands were made. Necessarily, the longer the cargo remained unclaimed, the higher the demurrage. Thus, while in his letter, private respondent's counsel demanded payment of only P37,800, the additional demurrage incurred by petitioner due to its continued refusal to receive delivery of the cargo ballooned to P67,340 by November 22, 1983. The contract of carriage, as stipulated in the bill of lading in the present case, must be treated independently of the contract of sale between the seller and the buyer, and the contract for the issuance of a letter of credit between the buyer and the issuing bank. Any discrepancy between the amount of the goods described in the commercial invoice in the contract of sale and the amount allowed in the letter of credit will not affect the validity and enforceability of the contract of carriage as embodied in the bill of lading. (Keng Hua Paper v. CA)

SECTION TWO - LOANS ON BOTTOMRY AND RESPONDENTIA ARTICLE 719. A loan in which under any condition whatever, the repayment of the sum loaned and of the premium stipulated depends upon the safe arrival in port of the goods on which it is made, or of the price they may receive in case of accident, shall be considered a loan on bottomry or respondentia. 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 – contract in the nature of a mortgage, by which the owner of a ship borrows money for the use, equipment or repair of the vessel, and for a definite term, and pledges the ship (or the keel and bottom of the ship) as a security for its repayment, with maritime or extraordinary interest on account of the maritime risks to be borne by the lender, it being stipulated that if the ship be lost in the course of the specific voyage, or during the limited time, by any of the perils enumerated in the contract, the lender shall also lose his money • loan on respondentia – made on the goods laden on board the ship, and which are to be sold or exchanged in the course of the voyage, the borrower’s personal responsibility being deemed the principal security for the performance of a contract, which is therefore called respondentia; the lender must be paid his principal and interest, though the ship perishes, provided the goods are saved.

LOAN ON BOTTOMRY

LOAN ON RESPONDENTIA

Definition

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 contract

Sh ipowner o r sh ip 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 instrument

2. 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/ RESPONDENTIA

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)


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ARTICLE 720. Loans on bottomry or respondentia may be executed: 1. By means of a public instrument. 2. By means of a policy signed by the contracting parties and the broker taking part therein. 3. By means of a private instrument. Under whichever of these forms the contract is executed, it shall be entered in the certificate of the registry of the vessel and shall be recorded in the registry of vessels, without which requisites the credits of this kind shall not have, with regard to other credits, the preference which, according to their nature, they should have, although the obligation shall be valid between the contracting parties. The contracts made during a voyage shall be governed by the provisions of Articles 583 and 611, and shall be effective with regard to third persons from the date of their execution, if they should be recorded in the registry of vessels of the port of registry of the vessel before the lapse of eight days following its arrival. If said eight days should elapse without the record having been made in the corresponding registry, the contracts made during the voyage of a vessel shall produce no effect with regard to third persons, except from the day and date of their inscription. In order that the policy of the contracts executed in accordance with No. 2 may have binding force, they must conform to the registry of the broker who took part therein. With respect to those executed in accordance with No. 3 the acknowledgment of the signature shall be required. Contracts which are not reduced to writing shall not give rise to judicial action. ARTICLE 721. In a contract on bottomry or respondentia the following must be stated: 1. The kind, name, and registry of the vessel. 2. The name, surname, and domicile of the captain. 3. The names, surnames, and domiciles of the person giving and the person receiving the loan. 4. The amount of the loan and the premium stipulated. 5. The time for repayment. 6. The goods pledged to secure repayment. 7. The voyage during which the risk is run. ARTICLE 722. The contract may be made to order, in which case they shall be transferable by indorsement, and the indorsee shall acquire all the rights and shall incur all the risks corresponding to the indorser. ARTICLE 723. Loans may be made in goods and in merchandise, fixing their value in order to determine the principal of the loan. • a lender can impose an extraordinary rate of interest because if the security disappears, the principal obligation disappears as well

• later loan on respondentia gives preference over an earlier one ARTICLE 724. The loans may be constituted jointly or separately: 1. On the hull of the vessel. 2. On the rigging. 3. On the equipment, provisions, and fuel. 4. On the engine, if the vessel is a steamer. 5. On the merchandise loaded. If the loan in constituted on the hull of the vessel, the rigging, equipment and other goods, provisions, fuel, steam engines, and the freightage earned during the voyage on which the loan is made shall also be considered as included in the liability for the loan. If the loan is made on the cargo, all that which constitutes the same shall be subject to the repayment; and if on a particular object of the vessel or of the cargo, only the object concretely and specifically mentioned shall be liable. ARTICLE 725. No loans on bottomry may be made on the salaries of the crew or on the profits expected. ARTICLE 726. If the lender should prove that he loaned an amount larger than the value of the object liable for the bottomry loan, on account of fraudulent measures employed by the borrower, the loan shall be valid only for the amount at which said object is appraised by experts. The surplus principal shall be returned with legal interests for the entire time required for repayment. ARTICLE 727. If the full amount of the loan contracted in order to load the vessel should not be used for the cargo, the balance shall be returned before clearing. The same procedure shall be observed with regard to the goods taken as loan, if they were not loaded. 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) ARTICLE 728. The loan which the captain takes at the point of residence of the owners of the vessel shall only affect that part thereof which belongs to the captain, if the other owners or their agents should not have given their express authorization therefor or should not have taken part in the transaction. If one or more of the owners should be requested to furnish the amount necessary to repair or provision the vessel, and they should not do so within twenty-four hours, the interest which the parties in default may have in the vessel shall be liable for the loan in the proper proportion. Outside of the residence of the owners the captain may contract loans in accordance with the provisions of Articles 583 and 611. ARTICLE 729. Should the goods on which money is taken not be subjected to risk, the contract shall be considered a simple loan, with the obligation on the part of the borrower to return the principal and interest at the legal rate, if that agreed upon should not be lower. ARTICLE 730. Loans made during the voyage shall have preference over those made before the clearing of the vessel, and they shall be graduated in the inverse order of their dates. The loans for the last voyage shall have preference over prior ones.

The last lender is a preferred

creditor

The first lender is a preferred

creditor

MARINE INSURANCE

LOAN ON BOTTOMRY OR

RESPONDENTIA

Indemnity 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


- � -57Should several loans have been made at the same port of arrival under stress and for the same purpose, all of them shall be paid pro rata. • preference in inverse order – reason: the later loans contribute to the preservation of the vessel and of the prior credits, and if this order of preference did not exist, it would be impossible to obtain the necessary loan in case of necessity if the vessel or merchandise should already be burdened by prior loans ARTICLE 731. The actions pertaining to the lender shall be extinguished by the absolute loss of the goods on which the loan was made, if it arose from an accident of the sea at the time and during the voyage designated in the contract, and it is proven that the cargo was on board; but this shall not take place if the loss was caused by the inherent defect of the thing, or through the fault or malice, of the borrower, or barratry on the part of the captain, or if it was caused by damages suffered by the vessel as a consequence of being engaged in contraband, or if it arose from having loaded the merchandise on a vessel different from that designated in the contract, unless this change should have been made by reason of force majeure. Proof of the loss as well as of the existence in the vessel of the goods declared to the lender as the object of the loan is incumbent upon him who received the loan. Hypothecary Nature of Bottomry/ Respondentia GENERAL RULE: The obligation of the borrower to pay the loan is extinguished if the goods given as security are absolutely lost by reason of an accident of the sea, during the voyage designated, and if 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; and 5. The cargo loaded on the vessel be different in from that agreed upon. ARTICLE 732. Lenders on bottomry or respondentia shall suffer, in proportion to their respective interest, the general average which may take place in the goods on which the loan is made. In particular averages, in the absence of an express agreement between the contracting parties, the lender on bottomry or respondentia shall also contribute in proportion to his respective interest, should it not belong to the kind of risks excepted in the foregoing article. ARTICLE 733. Should the period during which the lender shall run the risk not have been stated in the contract, it shall last, with regard to the vessel, engines, rigging, and equipment, from the moment said vessel puts to sea until she drops anchor in the port of destination; and with regard to the merchandise, from the time they are loaded at the shore or wharf of the port of shipment until they are unloaded in the port of consignment. ARTICLE 734. In case of shipwreck, the amount liable for the payment of the loan shall be reduced to the proceeds of the goods saved, after deducting the costs of the salvage. If the loan should be on the vessel or any of its parts, the freightage earned during the voyage for which said loan was contracted shall also be liable for its payment, as far as it may reach. ARTICLE 735. If the same vessel or cargo should be the object of a loan on bottomry or respondentia and marine insurance, the value of what may be saved in case of shipwreck shall be divided between the lender and the insurer, in proportion to the legitimate interest of each one, taking into consideration, for this purpose only, the principal with respect to the loan, and without prejudice to the right of preference of other creditors in accordance with Article 580.

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.) ARTICLE 736. If there should be delay in repayment of the principal and premiums of the loan, only the former shall bear of legal interest. TITLE FOUR - RISKS, DAMAGES AND ACCIDENTS OF MARITIME

COMMERCE SECTION ONE - AVERAGES

ARTICLE 806. For the purposes of this code the following shall be considered averages: 1. All extraordinary or accidental expenses which may be incurred during the voyage in order to preserve the vessel, the cargo, or both. 2. Any damages or deteriorations which the vessel may suffer from the time it puts to sea from the port of departure until it casts anchor in the port of destination, and those suffered by the merchandise from the time they are loaded in the port of shipment until they are unloaded in the port of their consignment. • the risks, damages and accidents of maritime commerce are: (1) averages, both general and particular (2) arrivals under stress (3) collisions (4) shipwrecks 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 Average 2. 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. When, in conformity with marine regulations, cargo is carried on the deck of a steamer engaged in coastwise trade, the jettison of such cargo upon occasion of peril makes a case for general average. (Standard Oil v. Castelo) 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) The expenses are not considered general average. The defendant cannot be made to contribute. The stranding of plaintiff's vessel was due to the sudden shifting of the sandbars at the mouth of the river which the port pilot did not anticipate, hence, accidental. General or gross averages include "all the damages and expenses which are


- � -58deliberately caused in order to save the vessel, its cargo, or both at the same time, from a real and known risk" (Art. 811). Being for the common benefit, gross averages are to be borne by the owners of the articles saved (Art. 812). Tolentino gives the following requisites for general average: (1) common danger – both ship and cargo, after it has been loaded, are subject to the same danger - the danger arises from accidents of the sea, dispositions of the authority, or faults of men; the circumstance producing the peril should be ascertained and imminent - or may rationally be said to be certain and imminent. This last requirement excludes measures undertaken against a distant peril; (2) for the common safety part of the vessel/cargo/both is sacrificed deliberately; (3) from the expenses or damages caused follows the successful saving of the vessel and cargo; (4) the expenses or damages should have been incurred or inflicted after taking proper legal steps and authority. (Ibid.) ARTICLE 807. The petty and ordinary expenses incident to navigation, such as those of pilotage of coasts and ports, those of lighterage and towage, anchorage, inspection, health, quarantine, lazaretto, and other so-called port expenses, costs of barges and unloading until the merchandise is placed on the wharf, and any other usual expenses of navigation, shall be considered ordinary expenses to be defrayed by the shipowner, unless there is an express agreement to the contrary. ARTICLE 808. Averages shall be: 1. Simple or particular. 2. General or gross. ARTICLE 809. As a general rule, simple or particular averages shall include all the expenses and damages caused to the vessel or to her cargo which have not inured to the common benefit and profit of all the persons interested in the vessel and her cargo, and especially the following: 1. The losses suffered by the cargo from the time of its embarkation until it is unloaded, either on account of inherent defect of the goods or by reason of an accident of the sea or force majeure, and the expenses incurred to avoid and repair the same. 2. The losses and expenses suffered by the vessel in its hull, rigging, arms, and equipment, for the same causes and reasons, from the time it puts to sea from the port of departure until it anchors and lands in the port of destination. 3. The losses suffered by the merchandise loaded on deck, except in coastwise navigation, if the marine ordinances allow it. 4. The wages and victuals of the crew when the vessel is detained or embargoed by legitimate order or force majeure, if the charter has been contracted for a fixed sum for the voyage. 5. The necessary expenses on arrival at a port, in order to make repairs or secure provisions. 6. The lowest value of the goods sold by the captain in arrivals under stress for the payment of provisions and in order to save the crew, or to meet any other need of the vessel, against which the proper amount shall be charged. 7. The victuals and wages of the crew while the vessel is in quarantine. 8. The loss inflicted upon the vessel or cargo by reason of an impact or collision with another, if it is accidental and unavoidable. If the accident should occur through the fault or negligence of the captain, the latter shall be liable for all the losses caused. 8. Any loss suffered by the cargo through the fault, negligence,

or barratry of the captain or of the crew, without prejudice to the right of the owner to recover the corresponding indemnity from the captain, the vessel, and the freightage.

PARTICULAR OR SIMPLE

GROSS OR GENERAL

Definition

D a m a g e s o r e x p e n s e s

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)

Requisites

1. 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

l e n d e r s o n b o t t o m r y a n d

r e s p o n d e n t i a s h a l l l i k e w i s e

contribute. (Art.732).

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

owner’s property saved

Right to recover

No reimbursement There may be reimbursement

Kinds (not exclusive)

Art. 809 Art. 811

Procedure for recovery

1. Assembly and deliberation

2. Resolution of the captain

3. Entry of the resolution in the

logbook

4. Detailed minutes

5. 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)


- � -59As a rule, general or gross averages include all damages and expenses which are deliberately caused in order to save the vessel, its cargo, or both at the same time, from a real and known risk. While the instant case may technically fall within the purview of the said provision, the formalities prescribed under Article 813 10 and 814 of the Code of Commerce in order to incur the expenses and cause the damage corresponding to gross average were not complied with. Consequently, respondent ESLI's claim for contribution from the consignees of the cargo at the time of the occurrence of the average turns to naught. (Phil. Home Assurance v. CA) 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) The law on averages under the Code of Commerce cannot be applied in determining liability where there is negligence on the part of the common carrier. (American Home Assurance v. CA) ARTICLE 810. The owner of the goods which gave rise to the expense or suffered the damage shall bear the simple or particular averages. ARTICLE 811. As a general rule, general or gross averages shall include all the damages and expenses which are deliberately caused in order to save the vessel, its cargo, or both at the same time, from a real and known risk, and particularly the following: 1. The goods or cash invested in the redemption of the vessel or of the cargo captured by enemies, privateers, or pirates, and the provisions, wages, and expenses of the vessel detained during the time the settlement or redemption is being made. 2. The goods jettisoned to lighten the vessel, whether they belong to the cargo, to the vessel, or to the crew, and the damage suffered through said act by the goods which are kept on board. 3. The cables and masts which are cut or rendered useless, the anchors and the chains which are abandoned, in order to save the cargo, the vessel, or both. 4. The expenses of removing or transferring a portion of the cargo in order to lighten the vessel and place it in condition to enter a port or roadstead, and the damage resulting therefrom to the goods removed or transferred. 5. The damage suffered by the goods of the cargo by the opening made in the vessel in order to drain it and prevent its sinking. 6. The expenses caused in order to float a vessel intentionally stranded for the purpose of saying it. 7. The damage caused to the vessel which had to be opened, scuttled or broken in order to save the cargo. 8. The expenses for the treatment and subsistence of the members of the crew who may have been wounded or crippled in defending or saying the vessel. 9. The wages of any member of the crew held as hostage by enemies, privateers, or pirates, and the necessary expenses which he may incur in his imprisonment, until he is returned to the vessel or to his domicile, should he prefer it. 10. The wages and victuals of the crew of a vessel chartered by the month, during the time that it is embargoed or detained by force majeure or by order of the government, or in order to repair the damage caused for the common benefit. 11. The depreciation resulting in the value of the goods sold at arrival under stress in order to repair the vessel by reason of gross average. 12. The expenses of the liquidation of the average. ARTICLE 817. If in lightening a vessel on account of a storm, in order to facilitate its entry into a port or roadstead, part of the cargo should be transferred to lighters or barges and be lost, the owner of said part shall be entitled to indemnity, as if the loss had originated from a gross average, the amount thereof being distributed between the vessel and cargo from which it came.

If, on the contrary, the merchandise transferred should be saved and the vessel should be lost, no liability may be demanded of the salvage. ARTICLE 818. If, as a necessary measure to extinguish a fire in a port, roadstead, creek, or bay, it should be decided to sink any vessel, this loss shall be considered gross average, to which the vessels saved shall contribute. ARTICLE 812. In order to satisfy the amount of the gross or general averages, all the persons having an interest in the vessel and cargo therein at the time of the occurrence of the average shall contribute. ARTICLE 813. In order to incur the expenses and cause the damages corresponding to gross average, there must be a resolution of the captain, adopted after deliberation with the sailing mate and other officers of the vessel, and after hearing the persons interested in the cargo who may be present. If the latter shall object, and the captain and officers or a majority of them, or the captain, if opposed to the majority, should consider certain measures necessary, they may be executed under his responsibility, without prejudice to the right of the shippers to proceed against the captain before the competent judge or court, if they can prove that he acted with malice, lack of skill, or negligence. If the persons interested in the cargo, being on board the vessel, have not been heard, they shall not contribute to the gross average, their share being chargeable against the captain, unless the urgency of the case should be such that the time necessary for previous deliberations was wanting. ARTICLE 814. The resolution adopted to cause the damages which constitute general average must necessarily be entered in the log book, stating the motives and reasons for the dissent, should there be any, and the irresistible and urgent causes which impelled the captain if he acted of his own accord. In the first case the minutes shall be signed by all the persons present who could do so before taking action, if possible; and if not, at the first opportunity. In the second case, it shall be signed by the captain and by the officers of the vessel. In the minutes, and after the resolution, shall be stated in detail all the goods jettisoned, and mention shall be made of the injuries caused to those kept on board. The captain shall be obliged to deliver one copy of these minutes to the maritime judicial authority of the first port he may make, within twenty-four hours after his arrival, and to ratify it immediately under oath. ARTICLE 815. The captain shall direct the jettison, and shall order the goods cast overboard in the following order: 1. Those which are on deck, beginning with those which embarrass the maneuver or damage of the vessel, preferring, if possible, the heaviest ones with the least utility and value. 2. Those which are below the upper deck, always beginning with those of the greatest weight and smallest value, to the amount and number absolutely indispensable. 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)


- � -60 ARTICLE 816. In order that the goods jettisoned may be included in the gross average and the owners thereof be entitled to indemnity, it shall be necessary insofar as the cargo is concerned that their existence on board be proven by means of the bill of lading; and with regard to those belonging to the vessel, by means of the inventory prepared before the departure in accordance with the first paragraph of Article 812.

SECTION TWO - ARRIVALS UNDER STRESS ARTICLE 819. If during the voyage the captain should believe that the vessel can not continue the trip to the port of destination on account of the lack of provisions, well-founded fear of seizure, privateers, or pirates, or by reason of any accident of the sea disabling it to navigate, he shall assemble the officers and shall summon the persons interested in the cargo who may be present, and who may attend the meeting without the right to vote; and if, after examining the circumstances of the case, the reason should be considered well-founded, the arrival at the nearest and most convenient port shall be agreed upon, drafting and entering the proper minutes, which shall be signed by all, in the log book. The captain shall have the deciding vote, and the persons interested in the cargo, may make the objections and protests they may deem proper, which shall be entered in the minutes in order that they may make use thereof in the manner they may consider advisable. ARTICLE 820. An arrival shall not be considered lawful in the following cases: 1. If the lack of provisions should arise from the failure to take the necessary provisions for the voyage according to usage and customs, or if they should have been rendered useless or lost through bad stowage or negligence in their care. 2. If the risk of enemies, privateers, or pirates should not have been well known, manifest, and based on positive and provable facts. 3. If the defect of the vessel should have arisen from the fact that it was not repaired, rigged, equipped, and prepared in a manner suitable for the voyage, or from some erroneous order of the captain. 4. When malice, negligence, want of foresight, or lack of skill on the part of the captain exists in the act causing the damage. ARTICLE 821. The expenses of an arrival under stress shall always be for the account of the shipowner or agent, but they shall not be liable for the damages which may be caused the shippers by reason of the arrival provided the latter is legitimate. Otherwise, the ship agent and the captain shall be jointly liable. Arrival under stress (Arribada) – arrival of a vessel at the nearest and most convenient port, if during the voyage the vessel cannot continue the trip to the port of destination due to: (1) lack of provisions (2) a well-founded fear of seizure, privateers of pirates (3) by reason of any accident of the sea disabling it to navigate

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. ARTICLE 822. If in order to make repairs to the vessel or because there is danger that the cargo may suffer damage, it should be necessary to unload, the captain must request authorization from the competent judge or court for the removal, and carry it out with the knowledge of the person interested in the cargo, or his representative, should there be any. In a foreign port, it shall be the duty, of the Philippine Consul, where there is one, to give the authorization. In the first case, the expenses shall be for the account of the ship agent or owner, and in the second, they shall be chargeable against the owners of the merchandise for whose benefit the act was performed. If the unloading should take place for both reasons, the expenses shall be divided proportionately between the value of the vessel and that of the cargo. ARTICLE 823. The custody and preservation of the cargo which has been unloaded shall be intrusted to the captain, who shall be responsible for the same, except in cases of force majeure. ARTICLE 824. If the entire cargo or part thereof should appear to be damaged, or there should be imminent danger of its being damaged, the captain may request of the competent judge or court, or of the consul in a proper case, the sale of all or of part of the former, and the person taking cognizance of the matter shall authorize it, after an examination and declaration of experts, advertisements, and other formalitiesrequired by the case, and an entry in the book, in accordance with the provisions of Article 624. The captain shall, in a proper case, justify the legality of his conduct, under the penalty of answering to the shipper for the

When lawful When unlawful W h o b e a r s

expenses:

The i nab i l i t y t o

continue voyage is

d u e t o l a c k o f

provis ions, wel l -

founded fear o f

seizure, privateers,

pirates, or accidents

of the sea disabling

it to navigate. (Art.

819)

1. L a c k o f

provisions due

to negligence to

carry according

to usage and

customs;

2. Risk of enemy

not well known

or manifest

3. Defect of vessel

due to improper

repair; and

4. M a l i c e ,

negligence, lack

of foresight or

skill of captain.

(Art. 820)

The shipowner or ship

agent is liable in case

of unlawful arr ival

under stress. But they

shall not be liable for

the damages caused

by reason of a lawful

arrival. (Art. 821)


- � -61price the merchandise would have brought if they had arrived in good condition at the port of destination. ARTICLE 825. The captain shall be responsible for the damages caused by his delay, if after the cause of the arrival under stress has ceased, he should not continue the voyage. If the cause of arrival should have been the fear of enemies, privateers, or pirates, a deliberation and resolution in a meeting of the officers of the vessel and persons interested in the cargo who may be present, in accordance with the provisions contained in Article 819, shall precede the departure.

SECTION THREE - COLLISIONS ARTICLE 826. If a vessel should collide with another, through or the fault, negligence, or lack of skill of the captain, sailing mate, or any other member of the complement, the owner of the vessel at fault shall indemnify the losses and damages suffered, after an expert appraisal. ARTICLE 827. If the collision is imputable to both vessels, each one shall suffer its own damages, and both shall be solidarily responsible for the losses and damages occasioned to their cargoes. ARTICLE 828. The provisions of the preceding article are applicable to the use in which it cannot be determined which of the two vessels has caused the collision. ARTICLE 829. In the cases above mentioned the civil action of the owner against the person causing the injury as well as the criminal liabilities, which may be proper, are reserved. ARTICLE 830. If a vessel should collide with another, through fortuitous event or force majeure, each vessel and its cargo shall bear its own damages. ARTICLE 831. If a vessel should be forced by a third vessel to collide with another, the owner of the third vessel shall indemnify the losses and damages caused, the captain thereof being civilly liable to said owner. ARTICLE 832. If by reason of a storm or other cause of force majeure, a vessel which is properly anchored and moored should collide with those nearby, causing them damages, the injury occasioned shall be considered as particular average of the vessel run into. COLLISION - Impact of two vessels both of which are moving. Allision - Impact between a moving vessel and a stationary one. Zones of time in collision: (1) first division – covers all the time up to the moment when the risk of collision may be said to have begun - within this zone no rule is applicable because none is necessary - each vessel is free to direct its course as it deems best with reference to the movements of the other vessel (2) second division – covers the time between the moment when the risk of collision begins and the moment when it becomes a practical certainty (3) third division – covers the time between the moment when collision has become a practical certainty and the moment of actual contact o if a vessel, having a right of way, suddenly changes its course during the third zone, in an effort to avoid an imminent collision due to the fault of another vessel, such act may be said to be done in extremis , and even if wrong, cannot create responsibility on the part of said vessel with the right of way • defense of diligence in the selection of employees not available to shipowner in maritime tort

• application of doctrine of last clear chance – does not apply because of the provisions of Art. 827, under which, the evidence disclosing that both vessels are blameworthy, the owners of neither can successfully maintain an action against the other for the loss of or injury to his vessels Cases Covered By Collision and Allision 1. 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) ARTICLE 833. A vessel which, upon being run into, sinks immediately, as well as that which, having been obliged to make a port to repair the damages caused by the collision, is lost during the voyage or is obliged to be stranded in order to be saved, shall be presumed as lost by reason of collision. ARTICLE 834. If the vessels colliding with each other should have pilots on board discharging their duties at the time of the collision, their presence shall not exempt the captains from the liabilities they incur, but the latter shall have the right to be indemnified by the pilots, without prejudice to the criminal liability which the latter may incur. ARTICLE 835. The action for the recovery of losses and damages arising from collisions cannot be admitted if a protest or declaration is not presented within twenty-four hours before the competent authority of the point where the collision took place, or that of the first port of arrival of the vessel, if in Philippine territory, and to the consul of the Republic of the Philippines if it occurred in a foreign country. 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)


- � -62ARTICLE 836. With respect to damages caused to persons or to the cargo, the absence of protest may not prejudice the persons interested who were not on board or were not in a condition to make known their wishes. ARTICLE 837. The civil liability incurred by the shipowners in the case prescribed in this section, shall be understood as limited to the value of the vessel with all its appurtenances and freightage earned during the voyage. • In case of illegal or tortious acts of the captain the liability of the shipowner and agent is subsidiary. In such instance the shipowner or agent may avail of the provisions of Article 837 of the Code by abandoning the vessel. However, if the injury or damage is caused by the shipowner's fault as where he engages the services of an inexperienced and unlicensed captain or engineer, he cannot avail of the provisions of Article 837 of the Code by abandoning the vessel. He is personally liable for the damages arising thereby. (Luzon Stevedoring v. CA) We reiterate what We said in previous decisions that the real and hypothecary nature of the liability of the shipowner or agent is embodied in the provisions of the Maritime Law, Book III, Code of Commerce. Articles 587, 590 and 837 of the same code are precisely intended to limit the liability of the shipowner or agent to the value of the vessel, its appurtenances and freightage earned in the voyage, provided that owner or agent abandons the vessel. Although it is not specifically provided for in Article 837 of the same code that in case of collision there should be such abandonment to enjoy such limited liability, said article on collision of vessels is a mere amplification of the provisions of Articles 587 and 590 of same code where abandonment of the vessel is a pre-condition. Even without said article, the parties may avail of the provisions of Articles 587 and 590 of same code in case of collision. This is the reason why Article 837 of the same code is considered a superfluity. (Ibid.) ARTICLE 838. When the value of the vessel and her appurtenances should not be sufficient to cover all the liabilities, the indemnity due by reason of the death or injury of persons shall have preference. Rule of limited liability – in case of collisions, the liability of the vessel owner is limited to the value of the vessel and the freightage earned during the voyage; consequently, his property, other than such vessel and freightage earned during the voyage cannot be made to answer for his liability arising from collision with other vessels. ARTICLE 839. If the collision should take place between Philippine vessels in foreign waters, or if having taken place in the open seas, and the vessels should make a foreign port, the Consul of the Republic of the Philippines in said port shall hold a summary investigation of the accident, forwarding the proceedings to the Secretary of the Department of Foreign Affairs for continuation and conclusion. Collision falls among matters not specifically regulated by the Civil Code, so that the Code of Commerce applies. Article 826 of the Code of Commerce provides that where collision is imputable to the personnel of a vessel, the owner of the vessel at fault, shall indemnify the losses and damages incurred after an expert appraisal. Article 827 provides that if the collision is imputable to both vessels, each one shall suffer its own damages and both shall be solidarily responsible for the losses and damages suffered by their cargoes. Under Articles 826 to 839, the shipowner or carrier, is not exempt from liability for damages arising from collision due to the fault or negligence of the captain. Primary liability is imposed on the shipowner or carrier in recognition of the universally accepted doctrine that the shipmaster or captain is merely the representative of the owner who has the actual or constructive control over the conduct of the voyage. COGSA, in no uncertain terms, restricts its application "to all contracts for the carriage of goods by sea to and from Philippine ports in foreign trade." Under Section 1 thereof, it is explicitly provided that "nothing in

this Act shall be construed as repealing any existing provision of the Code of Commerce which is now in force, or as limiting its application." • In case of collision, both the owner and the agent are civilly responsible for the acts of the captain. Both the owner and agent (Naviero) should be declared jointly and severally liable, since the obligation which is the subject of the action had its origin in a tortious act and did not arise from contract, without prejudice, however, to his rights against the owner of the ship, to the extent of the value of the vessel, its equipment, and the freight. The declared value of the goods was stated in the bills of lading and corroborated no less by invoices offered as evidence during the trial. Common carriers "cannot limit its liability for injury to a less of goods where such injury or loss was caused by its own negligence." Negligence of the captains of the colliding vessel being the cause of the collision, and the cargoes not being jettisoned to save some of the cargoes and the vessel, the trial court and the Court of Appeals acted correctly in not applying the law on averages (Articles 806 to 818, Code of Commerce). (NDC v. CA)

SECTION FOUR - SHIPWRECKS ARTICLE 840. The losses and deteriorations suffered by a vessel and her cargo by reason of shipwreck or stranding shall be individually for the account of the owners, the part which may be saved belonging to them in the same proportion. ARTICLE 841. If the wreck or stranding should be caused by the malice, negligence, or lack of skill of the captain, or because the vessel put to sea was insufficiently repaired and equipped, the ship agent or the shippers may demand indemnity of the captain for the damages caused to the vessel or to the cargo by the accident, in accordance with the provisions contained in Articles 610, 612, 614, and 621. Shipwreck - in its popular sense: a ship which has received injuries rendering her incapable of navigation; loss of a vessel at sea, either by being swallowed up by the waves, by running against another vessel or thing at sea, or on the coast. Burden of liability – the captain is liable where: in case of the wreck or stranding is due to the (1) malice, negligence, or lack of skill of the captain; (2) because the vessel put to sea was insufficiently repaired and equipped. ARTICLE 842. The goods saved from the wreck shall be specially bound for the payment of the expenses of the respective salvage, and the amount thereof must be paid by the owners of the former before they are delivered to them, and with preference over any other obligation if the merchandise should be sold. ARTICLE 843. If several vessels sail under convoy, and any of them should be wrecked, the cargo saved shall be distributed among the rest in proportion to the amount which each one is able to take. If any captain should refuse, without sufficient cause, to receive what may correspond to him, the captain of the wrecked vessel shall enter a protest against him, before two sea officials, of the losses and damages resulting therefrom, ratifying the protest within twenty-four hours after arrival at the first port, and including it in the proceedings he must institute in accordance with the provisions contained in Article 612. If it is not possible to transfer to the other vessels the entire cargo of the vessel wrecked, the goods of the highest value and smallest volume shall be saved first, the designation thereof to be made by the captain with the concurrence of the officers of his vessel. ARTICLE 844. A captain who may have taken on board the goods saved from the wreck shall continue his course to the port of destination, and on arrival shall deposit the same, with judicial the intervention, at the disposal of their legitimate owners. In case he changes his course, if he can unload them at the port of which they were consigned, the captain may make said port if the shippers or supercargoes present and the officers and passengers of the vessel consent thereto; but he may not do so,


- � -63even with said consent, in time of war or when the port is difficult and dangerous to make. The owners of the cargo shall defray all the expenses of this arrival as well as the payment of the freightage which, after taking into consideration the circumstances of the case, may be fixed by agreement or by a judicial decision. ARTICLE 845. If on the vessel there should be no person interested in the cargo who can pay the expenses and freightage corresponding to the salvage, the competent judge or court may order the sale of the part necessary to cover the same. This shall also be done when its preservation is dangerous, or when in a period of one year it should not have been possible to ascertain who are its legitimate owners. In both cases the proceedings shall be with the publicity and formalities prescribed in Article 579, and the net proceeds of the sale shall be safely deposited, in the discretion of the judge or court, so that they may be delivered to the legitimate owner thereof. SHIPWRECK It is the loss of the vessel at sea as a consequence of its grounding, or running against an object in sea or on the coast. It occurs when the vessel sustains injuries due to a marine peril rendering her incapable of navigation. If the wreck was due to malice, negligence or lack of skill of the captain, the owner of the vessel may demand indemnity from said captain. (Art. 841) The rules on collision or allision, as may be pertinent, can equally apply to shipwrecks. SPECIAL CONCEPTS ARRASTRE SERVICE A contract for the unloading of goods from a vessel. Applicability: Overseas trade only. (Commercial Law Review, C. Villanueva, 2004 ed.) Significance: When a person brings in cargo from abroad, he cannot unload and deliver the cargo by himself. The unloading must be done by the arrastre operator, which will then deliver the cargo to the importer. (Commercial Law Review, C. Villanueva, 2004 ed.) Nature of business: It is a public utility, discharging functions which are heavily invested with public interest. Liability: 1. Similar to a warehouseman (Lua Kian v. Manila Railroad) 2. Similar to a common carrier (Northern Motors v. Prince Line) 3. Solidary liability with the common carrier Note: In order that the arrastre operator may be held liable, the consignee must prove that the damage was due to the negligence and while the goods are in the custody of the arrastre operator. (Hartford Fire Insurance v. E. Razon, Inc.) STEVEDORING SERVICE The carriage of goods from the warehouse or pier to the holds of the vessel. (Chief of Staff vs. CIR) As understood in the port business, the term consists of the handling of cargo from the hold of the ship to the dock, in case of pier-side unloading; or to a barge, in case of unloading at sea. (Anglo-Fil Trading Corp. vs. Lazaro) The loading on the ship of outgoing cargo is also part of stevedoring work. (Ibid.) CONTAINERIZATION/ “SAID-TO-CONTAIN”/ “SHIPPER’S LOAD AND COUNT” SYSTEM System whereby the shipper loads his cargoes in a specially designed container, seals the container and delivers it to the carrier for transportation. The carrier does not participate in the counting of the merchandise for loading into the container, the actual loading, and the sealing of the container. (US Lines v. Comm. Of Customs, ICTSI v. Prudential Guarantee)

The matter of quantity, description and conditions of the cargo inside the container is the sole responsibility of the shipper, unless there is stipulation to the contrary. (US Lines vs. Comm. Of Customs, Reyma Brokerage v. Phil. Home Assurance) Note: In order to attribute to the carrier any damage to the shipment that may be found, inspection of the goods should be done at pier-side. (Bankers vs. CA) The containerization system was devised to facilitate the expeditious and economical loading, carriage and unloading of cargoes. Under this system, 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 thereof nor the sealing of the container. Having no actual knowledge of the kind, quantity or condition of the contents of the carrier, the carrier issues thee corresponding bill of lading based on the declaration of the shipper. The bill of lading describes the cargo as a container simply and it states the contents of the container either as advised by this shipper or prefaced by the phrase “said to contain.” (“STC”) Clearly then, the matter of quantity, description and conditions of the cargo is the sole responsibility of the shipper. The carrier, by signifying in the bill of lading that “it is a receipt … for the number of packages shown above” had explicitly admitted that the containerized shipments had actually the number of packages declared by the shipper in the bill of lading. This conclusion is bolstered by the stipulation printed in the bill of lading, “unless expressly acknowledged and agreed to.” This express acknowledgment of the carrier makes the case at bar an exception to the doctrine enunciated in United States Lines. The rule enunciated in United States Lines applies to a situation where the carrier of the containerized cargo simply admits the information furnished by the shipper with regard to the goods it shipped as reflected in the bill of lading but not where the carrier of the containerized cargo makes an explicit admission as to the weight, measurement marks, numbers, quality contents, and value, etc. In its stead, what governs is the dictum that the bill of lading shall be prima facie evidence of the receipt by the carrier of the goods as therein described. As the petitioner prim facie received all the shipments in the sealed containers, it has the burden to rebut the conclusion that it received the same without shortage. The petitioner had not overthrown this presumption by contrary evidence. Therefore, the respondent court did not commit any reversible error in agreeing with the trial court that the loss of the 203 cartons is attributable to the petitioner. (Reyma Brokerage v. Phil. Home Assurance)

CARRIAGE OF GOODS BY SEA ACT/COGSA (C.A. No. 65) COMMONWEALTH ACT NO. 65 IN ACT TO DECLARE THAT PUBLIC ACT NUMBERED FIVE HUNDRED AND TWENTY-ONE, KNOWN AS "CARRIAGE OF GOODS BY SEA ACT," ENACTED BY THE SEVENTY-FOURTH CONGRESS OF THE UNITED STATES, BE ACCEPTED, AS IT IS HEREBY ACCEPTED BY THE NATIONAL ASSEMBLY Numbered Five hundred and twenty-one, entitled: "Carriage of Goods by Sea Act"; WHEREAS, the primordial purpose of the said Acts is to bring about uniformity in ocean bills of lading and to give effect to the Brussels Treaty, signed by the United States with other powers; WHEREAS, the Government of the United States has left it to the Philippine Government to decide whether or not the said Act shall apply to carriage of goods by sea in foreign trade to and from Philippine ports; WHEREAS, the said Act of Congress contains advanced legislation, which is in consonance with modern maritime rules and the practices of the great shipping countries of the world; WHEREAS, shipping companies, shippers, and marine insurance companies, and various chambers of commerce, which are


- � -64directly affected by such legislation, have expressed their desire that said Congressional Act be made applicable and extended to the Philippines; therefore, SECTION 1. That the provisions of Public Act Numbered Five hundred and twenty-one of the Seventy-fourth Congress of the United States, approved on April sixteenth, nineteen hundred and thirty-six, be accepted, as it is hereby accepted to be made applicable to all contracts for the carriage of goods by sea to and from Philippine ports in foreign trade: Provided, That nothing in the Act shall be construed as repealing any existing provision of the Code of Commerce which is now in force, or as limiting its application. SECTION 2. This Act shall take effect upon its approval. Approved: October 22,1936. An Act Relating to the Carriage of Goods by Sea. Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That every bill of landing or similar document of title which is evidence of a contract for the carriage of goods by sea to or from ports of the United States, in foreign trade, shall have effect subject to the provisions of the Act. TITLE I SECTION 1. When used in this Act — (a) The term "carrier" includes the owner or the charterer who enters into a contract of carriage with a shipper. (b) The term "contract of carriage" applies only to contracts of carriage covered by a bill of lading or any similar document of title, insofar as such document relates to the carriage of goods by sea, including any bill of lading or any similar document as aforesaid issued under or pursuant to a charter party from the moment at which such bill of lading or similar document of title regulates the relations between a carrier and a holder of the same. (c) The term "goods" includes goods, wares, merchandise, and articles of every kind whatsoever, except live animals and cargo which by the contract of carriage is stated as being carried on deck and is so carried. (d) The term "ship" means any vessel used for the carriage of goods by sea. (e) The term "carriage of goods" covers the period from the time when the goods are loaded on to the time when they are discharged from the ship. • Sec. 1 of this Act expressly provides that nothing in it shall be construed as repealing any existing provisions of the Code of Commerce • It was held that contracts for the carriage of goods by sea, after July 4, 1946, from the US to the Philippine ports are governed by the Carriage of Goods by Sea Act • Under Article 1753, contracts for the carriage of goods by sea from the Philippines to a foreign country shall be governed by the laws of such foreign country • As to contracts for the carriage of goods by sea from a foreign country to the Philippines, the Civil Code shall primarily govern under authority of Article 1766 CC • Where the CC contains no provisions pertinent to the point in question, the provisions of the Code of Commerce and special laws, such as the COGSA, shall govern • Should there by any conflict between the provisions of the Code of Commerce and those of said Act, under Section 1 of said Act, the former shall prevail Risks

SECTION 2. Subject to the provisions of section 6, under every contract of carriage of goods by sea, the carrier in relation to the loading handling, stowage, carriage, custody, care, and discharge of such goods, shall be subject to the responsibilities and liabilities and entitled to the rights and immunities hereinafter set forth. Responsibilities and Liabilities SECTION 3. (1) The carrier shall be bound, before and at the beginning of the voyage, to exercise due diligence to — (a) Make the ship seaworthy; (b) Properly man, equip, and supply the ship; (c) Make the holds, refrigerating and cooling chambers, and all other parts of the ship in which goods are carried, fit and safe for their reception carriage and preservation. (2) The carrier shall properly and carefully load, handle, stow, carry, keep, care for, and discharge the goods carried. (3) After receiving the goods into his charge the carrier, or the master or agent of the carrier, shall, on demand of the shipper, issue to the shipper a bill of lading showing among other things — a) The leading marks necessary for identification of the goods as the same are furnished in writing by the shipper before the loading of such goods starts, provided such marks are stamped or otherwise shown clearly upon the goods if uncovered, or on the cases or coverings in which such goods are contained, in such a manner as should ordinarily remain legible until the end of the voyage. (b) Either the number of packages or pieces, or the quantity or weight, as the case may be, as furnished in writing by the shipper. (c) The apparent order and condition of the goods: Provided, That no carrier, master, or agent of the carrier, shall be bound to state or show in the bill of lading any marks, number, quantity, or weight which he has reasonable ground for suspecting not accurately to represent the goods actually received, or which he has had no reasonable means of checking. (4) Such a bill of lading shall be prima facie evidence of the receipt by the carrier of the goods as therein described in accordance with paragraphs (3) (a), (b), and (c) of this section: Provided, That nothing in this Act shall be construed as repealing or limiting the application of any part of the Act, as amended, entitled "An Act relating to bills of lading in interstate and foreign commerce," approved August 29, 1916 (U. S. C. title 49, secs. 81-124), commonly known as the "Pomerene Bills of Lading Act." (5) The shipper shall be deemed to have guaranteed to the carrier the accuracy at the time of shipment of the marks, number, quantity, and weight, as furnished by him; and the shipper shall indemnify the carrier against all loss damages, and expenses arising or resulting from inaccuracies in such particulars. The right of the carrier to such indemnity shall in no way limit his responsibility and liability under the contract of carriage or to any person other than the shipper. (6) Unless notice of loss or damage and the general nature of such loss or damage be given in writing to the carrier or his agent at the port of discharge before or at the time of the removal of the goods into the custody of the person entitled to delivery thereof under the contract of carriage, such removal shall be prima facie evidence of the delivery by the carrier of the goods as described in the bill of lading. If the loss or damage is not apparent, the notice must be given within three days of the delivery. Said notice of loss or damage may be endorsed upon the receipt for the goods given by the person taking delivery thereof. The notice in writing need not be given if the state of the goods has at the time of their receipt been the subject of joint survey or inspection.


- � -65In any event the carrier and the ship shall be discharged from all liability in respect of loss or damage unless suit is brought within one year after delivery of the goods or the date when the goods should have been delivered: Provided, That if a notice of loss or damage, either apparent or concealed, is not given as provided for in this section, that fact shall not affect or prejudice the right of the shipper to bring suit within one year after the delivery of the goods or the date when the goods should have been delivered In the case of any actual or apprehended loss or damage the carrier and the receiver shall give all reasonable facilities to each other for inspecting and tallying the goods. (7) After the goods are loaded the bill of lading to be issued by the carrier, master, or agent of the carrier to the shipper shall, if the shipper so demands, be a "shipped" bill of lading Provided, That if the shipper shall have previously taken up any document of title to such goods, he shall surrender the same as against the issue of the "shipped" bill of lading, but at the option of the carrier such document of title may be noted at the port of shipment by the carrier, master, or agent with name or name the names of the ship or ships upon which the goods have been shipped and the date or dates of shipment, and when so noted the same shall for the purpose of this section be deemed to constitute a "shipped" bill of lading. (8) Any clause, covenant, or agreement in a contract of carriage relieving the carrier or the ship from liability for loss or damage to or in connection with the goods, arising from negligence, fault, or failure in the duties and obligations provided in this section, or lessening such liability otherwise than as provided in this Act, shall be null and void and of no effect. A benefit of insurance in favor of the carrier, or similar clause, shall be deemed to be a clause relieving the carrier from liability. Rights and Immunities SECTION 4. (1) Neither the carrier nor the ship shall be liable for loss or damage arising or resulting from unseaworthiness unless caused by want of due diligence on the part of the carrier to make the ship seaworthy, and to secure that the ship is properly manned, equipped, and supplied, and to make to the holds, refrigerating and cool chambers, and all other parts of the ship in which goods are carried fit and safe for their reception, carriage, and preservation in accordance with the provisions of paragraph (1) of section 3. Whenever loss or damage has resulted from unseaworthiness, the burden of proving the exercise of due diligence shall be on the carrier or other persons claiming exemption under the section. (2) Neither the carrier nor the ship shall be responsible for loss or damage arising or resulting from — (a) Act, neglect, or default of the master, mariner, pilot, or the servants of the carrier in the navigation or in the management of the ship; (b) Fire, unless caused by the actual fault or privity of the carrier; (c) Perils, dangers, and accidents of the sea or other navigable waters; (d) Act of God; (e) Act of war, (f) Act of public enemies; (g) Arrest or restraint of princes, rulers, or people, or seizure under legal process; (h) Quarantine restrictions; (i) Act or omission of the shipper or owner of the goods, his agent or representative; (j) Strikes or lockouts or stoppage or restraint of labor from whatever cause, whether partial or general; Provided, That nothing herein contained shall be construed to relieve a carrier from responsibility for the carrier's own acts; (k) Riots and civil commotions (l) Saving or attempting to save life or property at sea;

(m) Wastage in bulk or weight or any other loss or damage arising from inherent defect, quality, or vice of the goods; (n) Insufficiency of packing; (o) Insufficiency of inadequacy of marks; (p) Latent defects not discoverable by due diligence; and (q) Any other cause arising without the actual fault and privity of the carrier and without the fault or neglect of the agents or servants of the carrier, but the burden of proof shall be on the person claiming the benefit of this exception to show that neither the actual fault or privity of the carrier nor the fault or neglect of the agents or servants of the carrier contributed to the loss or damage. (3) The shipper shall not be responsible for loss or damage sustained by the carrier or the ship arising from any cause without the act, fault, or neglect of the shipper, his agents, or servants. (4) Any deviation in saving or attempting to save life or property at sea, or any reasonable deviation shall not be deemed to be an infringement or breach of this Act or of the contract of carriage, and the carrier shall not be liable for any loss or damage resulting therefrom: Provided, however, That if the deviation is for the purpose of loading cargo or unloading cargo or passengers it shall, prima facie, be regarded as unreasonable. (5) Neither the carrier nor the ship shall in any event be or become liable for any loss or damage to or in connection with the transportation of goods in an amount exceeding $600 per package lawful money of the United States, or in case of goods not shipped in packages, per customary freight unit, or the equivalent of that sum in other currency, unless the nature and value of such goods have been declared by the shipper before shipment and inserted in the bill of lading. This declaration, if embodied in the bill of lading, shall be prima facie evidence, but shall not be conclusive on the carrier. By agreement between the carrier, master, or agent of the carrier, and the shipper another maximum amount than that mentioned in this paragraph may be fixed: Provided, That such maximum shall not be less than the figure above named. In no event shall the carrier be liable for more than the amount of damage actually sustained. Neither the carrier nor the ship shall be responsible in any event for loss or damage to or in connection with the transportation of the goods if the nature or value thereof has been knowingly and fraudulently misstated by the shipper in the bill of lading. (6) Goods of an inflammable, explosive, or dangerous nature to the shipment whereof the carrier, master or agent of the carrier, has not consented with knowledge of their nature and character, may at any time before discharge be landed at any place or destroyed or rendered innocuous by the carrier without compensation, and the shipper of such goods shall be liable for all damages and expenses directly or indirectly arising out of or resulting from such shipment. If any such goods shipped with such knowledge and consent shall become a danger to the ship or cargo, they may in like manner be landed at any place, or destroyed or rendered innocuous by the carrier without liability on the part of the carrier except to general average, if any. Surrender of Rights and Immunities and increase of “Package” in section 4(c) refer to “cartons” not to containers • the nature of the value of the goods as declared and reflected in the bill of lading is the basis of the liability of the carrier as the actual value of the losses; (Aboitiz Shipping Corporation v. CA) • parties may agree to amount less than $500 under Sec. 4(5) (Eastern & Australian Steamship Co., Ltd. v. Great American Ins. Co.) Responsibilities and Liabilities SECTION 5. A carrier shall be at liberty to surrender in whole or in part all or any of his rights and immunities or to increase any of


- � -66his responsibilities and liabilities under this Act, provided such surrender or increase shall be embodied in the bill of lading issued to the shipper. The provisions of this Act shall not be applicable to charter parties; but if bills of lading are issued in the case of a ship under charter party, they shall comply with the terms of this Act. Nothing in this Act shall be held to prevent the insertion in a bill of lading of any lawful provision regarding general average. Special Conditions SECTION 6. Notwithstanding the provisions of the preceding sections, a carrier, master or agent of the carrier, and a shipper shall, in regard to any particular goods be at liberty to enter into any agreement in any terms as to the responsibility and liability of the carrier for such goods, and as to the rights and immunities of the carrier in respect of such goods, or his obligation as to seaworthiness (so far as the stipulation regarding seaworthiness is not contrary to public policy), or the care or diligence of his servants or agents in regard to the loading, handling stowage, carriage, custody, care, and discharge of the goods carried by sea: Provided, That in this case no bill of lading has been or shall be issued and that the terms agreed shall be embodied in a receipt which shall be a non-negotiable document and shall be marked as such. Any agreement so entered into shall have full legal effect: Provided, That this section shall not apply to ordinary commercial shipments made in the ordinary course of trade but only to other shipments where the character or condition of the property to be carried or the circumstances, terms, and conditions under which the carriage is to be performed are such as reasonably to justify a special agreement. Under Sec. 6(3): the carrier and the ship shall be discharged fro all liability in respect to loss or damage unless suit is brought within 1 year after delivery of the goods or the date when the goods should have been delivered This provision anticipates 2 possibilities: 1. that delivery has been made, in which case the action should be brought “within one year after delivery of the goods”; 2. that no delivery has taken place, in which even said period should be computed from “the date when the goods should have been delivered” • It was held that one year prescriptive period applies to the insurer as subrogee of the shipper or consignee even if said insurer has not yet paid the shipper or consignee (Filipino Merchants Ins. Co. v. Alejandro) • cases of misdelivery or conversion not covered – prescriptive period is 10 years for contracts or 4 years for tortious obligations (Ang v. American Steamship Agencies) • an extrajudicial demand for damages does not toll prescription in the COGSA (DOLE Philippines, Inc. v. Maritime Co. of the Philippines) • when period renewed for another year by NCC and CC – F. H. Stevens & Co. v. Nordeuscher Lloyd) • shipper, consignee or legal holder of bill may invoke prescriptive period – from the language of Sec. 3(6), it seems clear that the notice of loss or damage is required to be filed not necessarily by the shipper but also by the consignee or any legal holder of the bill of lading • exception to 1-year prescriptive period: express agreement of the parties (Universal Shipping Lines, Inc. v. CA) SECTION 7. Nothing contained in this Act shall prevent a carrier or a shipper from entering into any agreement, stipulation, condition, reservation, or exemption as to the responsibility and liability of the carrier or the ship for the loss or damage to or in connection with the custody and care and handling of goods prior to the loading on and subsequent to the discharge from the ship on which the goods are carried by sea. SECTION 8. The provisions of this Act shall not affect the rights and obligations of the carrier under the provisions of the Shipping Act, 1916, or under the provisions of section 4281 to 4289,

inclusive, of the Revised Statutes of the United States, or of any amendments thereto; or under the provisions of any other enactment for the time being in force relating to the limitation of the liability of the owners of seagoing vessels. SECTION 9. Nothing contained in this Act shall be construed as permitting a common carrier by water to discriminate between competing shippers similarly place in time and circumstances, either (a) with respect to the right to demand and receive bills of lading subject to the provisions of this Act; or (b) when issuing such bills of lading, either in the surrender of any of the carrier's rights and immunities or in the increase of any of the carrier's responsibilities and liabilities pursuant to section 6, title I, of this Act or (c) in any other way prohibited by the Shipping Act, 1916, s amended. SECTION 10. Section 25 of the Interstate Commerce Act is hereby amended by adding the following proviso at the end of paragraph 4 thereof: "Provided, however, That insofar as any bill of lading authorized hereunder relates to the carriage of goods by sea, such bill of lading shall be subject to the provisions of the Carriage of Goods by Sea Act." SECTION 11. Where under the customs of any trade the weight of any bulk cargo inserted in the bill of lading is a weight ascertained or accepted by a third party other than the carrier or the shipper, and the fact that the weight is so ascertained or accepted is stated in the bill of lading, then, notwithstanding any thing in this Act, the bill of lading shall not be deemed to be prima facie evidence against the carrier of the receipt of goods of the weight so inserted in the bill of lading, and the accuracy thereof at the time of shipment shall not be deemed to have been guaranteed by the shipper. SECTION 12. Nothing in this Act shall be construed as superseding any part of the Act entitled "An act relating to navigation of vessels, bills of lading, and to certain obligations, duties, and rights in connection with the carriage of property," approved February 13,1893, or of any other law which would be applicable in the absence of this Act, insofar as they relate to the duties, responsibilities, and liabilities of the ship or carrier prior to the time when the goods are loaded on or after the time they are discharged from the ship. SECTION 13. This Act shall apply to all contracts for carriage of goods by sea to or from ports of the United States in foreign trade. As used in this Act the term "United States" includes its districts, territories, and possessions: Provided, however, That the Philippine legislature may by law exclude its application to transportation to or from ports of the Philippine Islands. The term "foreign trade" means the transportation of goods between the ports of the United States and ports of foreign countries. Nothing in this Act shall be held to apply to contracts for carriage of goods by sea between any port of the United States or its possessions, and any other port of the United States or its possession: Provided, however, That any bill of lading or similar document of title which is evidence of a contract for the carriage of goods by sea between such ports, containing an express statement that it shall be subject to the provisions of this Act, shall be subjected hereto as fully as if subject hereto as fully as if subject hereto by the express provisions of this Act: Provided, further, That every bill of lading or similar document of title which is evidence of a contract for the carriage of goods by sea from ports of the United States, in foreign trade, shall contain a statement that it shall have effect subject to the provisions of this Act. SECTION 14. Upon the certification of the Secretary of Commerce that the foreign commerce of the United States in its competition with that of foreign nations is prejudiced the provisions, or any of them, of Title I of this Act, or by the laws of any foreign country or countries relating to the carriage of goods by sea, the President of the United States, may, from time to time, by proclamation, suspend any or all provisions of Title I of this Act for such periods


- � -67of time or indefinitely as may be designated in the proclamation. The President may at any time rescind such suspension of Title I hereof, and any provisions thereof which may have been suspended shall thereby be reinstated and again apply to contracts thereafter made for the carriage of goods by sea. Any proclamation of suspension or rescission of any such suspension shall take effect on a date named therein, which date shall be not less than ten days from the issue of the proclamation. Any contract for the carriage of goods by sea, subject to the provisions of this Act, effective during any period when title I hereof, or any part thereof, is suspended, shall be subject to all provisions of law now or hereafter applicable to that part of Title I which may have thus been suspended. SECTION 15. This Act shall take effect ninety days after the date of its approval; but nothing in this Act shall apply during a period not to exceed one year following its approval to any contract for the carriage of goods by sea, made before the date on which this Act is approved, nor to any bill of lading or similar document of title issued, whether before or after such date of approval in pursuance of any such contract as aforesaid. SECTION 16. This Act may be cited as the "Carriage of Goods by Sea Act." Approved, April 16, 1936. APPLICABILITY The transportation must be: 1. Water/maritime transportation; 2. for the carriage of goods; and 3. overseas/international/foreign (from foreign port to Philippine port). It can be applied in domestic sea transportation if agreed upon by the parties. (Clause paramount or paramount clause) IMPORTANT FEATURES: 1. Amount of carrier’s liability 2. Notice of damage 3. Prescriptive period AMOUNT OF CARRIER’S LIABILITY Under the Sec. 4(5), the liability limit is set at $500 per package or customary freight unit unless the nature and value of such goods is declared by the shipper. This is deemed incorporated in the bill of lading even if not mentioned in it. (Eastern Shipping vs. IAC, 150 SCRA 463) Note that Art. 1749, NCC applies to domestic/inter-island/coastwise trade. NOTICE OF DAMAGE (SEC. 3(6)) Rules: a. Patent damage: shipper should file a claim with the carrier immediately upon delivery b. Latent damage: shipper should file a claim with the carrier within three days from delivery. Note: The filing of a notice of claim is not a condition precedent. PRESCRIPTIVE PERIOD Action for loss or damage to the cargo should be brought within one year after: a. Delivery of the goods (delivered but damaged goods); or b. The date when the goods should have been delivered (non-delivery). (Sec. 3[6]) “Loss or Damage” as applied to the COGSA contemplates a situation where no delivery at all was made by the shipper of the goods because the same had perished, gone out of commerce, or disappeared in such a way that their existence is unknown or they cannot be recovered. Thus, it is inapplicable in case of misdelivery or conversion. (Ang vs. American Steamship Agencies Inc.) and damage arising from delay or

late delivery (Mitsui O.S.K. Lines Ltd. vs. CA). In such instance the, Civil Code rules on prescription shall apply. The one-year prescriptive period is suspended by: 1. The express agreement of the parties (Universal Shipping Lines, Inc. vs. IAC, 188 SCRA 170) 2. The filing of an action in court until it is dismissed. (Stevens & Co. vs. Nordeutscher Lloyd, 6 SCRA 180) The one-year period shall run from delivery of the last package and is not suspended by extrajudicial demand. (Dole Phils.,Inc. vs. Maritime Co.,148 SCRA 118) The one-year period shall run from delivery to the arrastre operator and not to the consignee. (Union Carbide Phils, Inc. vs. Manila Railroad Co.,SCRA 359) The insurer exercising its right of subrogation is bound by the one-year prescriptive period. However, it does not apply to the claim against the insurer for the insurance proceeds. (Fil. Merchants Ins. Co. vs. Alejandro; Mayer Steel Pipe Corp. vs. CA)

THE SALVAGE LAW

SECTION 1. When in case of shipwreck, the vessel or its cargo shall be beyond the control of the crew, or shall have been abandoned by them, and picked up and conveyed to a safe place by other persons, the latter shall be entitled to a reward for the salvage. Those who, not being included in the above paragraph, assist in saving a vessel or its cargo from shipwreck, shall be entitled to a like reward. • Salvage – compensation allowed to persons by whose voluntary assistance a ship at sea or her cargo or both have been saved in 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 Two concepts: 1. Services one person renders to the owner of a ship or goods, by his own labor, preserving the goods or the ship which the owner or those entrusted with the care of them have either abandoned in distress at sea, or are unable to protect or secure. 2. Compensation allowed to persons by whose voluntary assistance a ship at sea or her cargo or both have been saved in whole

Warsaw Convention COGSA

Carriage by Air I n v o l v e s i n t e r n a t i o n a l transportation Transportation to and from the Philippines Applies to both passengers and goods Covers loss, damage, delay and misdelivery Notice of the above is a condition precedent for filing claims Prescriptive period is two years

Carriage by Sea May be domestic Transportation to the Philippines Applies to goods only Covers loss or damage only Notice of loss not necessary Prescriptive period for claims is one year


- � -68or in part from impending sea peril, or such property recovered from actual peril or loss, as in cases of shipwreck, derelict or recapture. Requisites: 1. Valid object of salvage; 2. Object must have been exposed to marine peril (not perils of the ship); 3. Services rendered voluntarily (neither an existing duty nor out of a pre-existing contract); 4. Services are successful, total or partial. Subjects 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). Persons 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; 3. In accordance with Sec. 3 of the Salvage Law, a person who fails to deliver a salvaged vessel or cargo to the Collector of Customs. Elements of salvage: (1) a marine peril (2) service voluntarily rendered when not required as an existing duty or from special contract (3) success, in whole or in part, or that services rendered contributed to such success • Shipwreck – in a popular sense, means a ship which has received injuries rendering her incapable by navigation; loss of a vessel at sea, either by being swallowed up by the waves, running against a thing at sea, or on the coast Arrival under stress – the ship is not lost, and is still able to go to its destination, though damaged or injured. • Derelict – ship or her cargo which is abandoned and deserted at sea by those who are in charge of it, without any hope of recovering it, or without any intention of returning to it; if those in charge of the property quitted it or left it with the intention of finally leaving it, it is a derelict, and the change of their intention and an attempt to return will not change its nature (Erlanger) If it is clear that the intention to return is slight, the salvage which was done thereafter is considered valid. (Notes and Cases on the Law on Transportation and Public Utilities, Aquino, T. & Hernando, R.P. 2004 ed. p. 616) SECTION 2. If the captain of the vessel, or the person acting in his stead, is present, no one shall take from the sea, or from the shores or coast merchandise or effects proceeding from a shipwreck or proceed to the salvage of the vessel, without the consent of such captain or person acting in his stead. SECTION 3. He who shall save or pick up a vessel or merchandise at sea, in the absence of the captain of the vessel, owner, or a representative of either of them, they being unknown, shall convey and deliver such vessel or merchandise, as soon as possible, to the Collector of Customs, if the port has a collector, and otherwise to the provincial treasurer or municipal mayor. SECTION 4. After the salvage is accomplished, the owner or his representative shall have a right to the delivery of the vessel or things saved, provided that he pays, or gives a bond to secure, the expenses and the proper reward. The amount and sufficiency of the bond, in the absence of agreement, shall be determined by the Collector of Customs or by

the Judge of the Court of First Instance of the province in which the things saved may be found. SECTION 5. The Collector of Customs, provincial treasurer, or municipal mayor, to whom a salvage is reported, shall order: a. That the things saved be safeguard and inventoried. b. The sale at public auction of the things saved which may be in danger of immediate loss or of those whose conservation is evidently prejudicial to the interests of the owner, when no objection is made to such sale. c. The advertisement within the thirty days subsequent to the salvage, in one of the local newspapers or in the nearest newspaper published, of all the details of the disaster, with a statement of the mark and number of the effects requesting all interested persons to make their claims. SECTION 6. If, while the vessel or things saved are at the disposition of the authorities, the owner or his representative shall claim them, such authorities shall order their delivery to such owner or his representative, provided that there is no secure the payment of the expenses and the proper reward. Otherwise, the delivery shall nor be made until the matter is decided by the Court of First Instance of the province. SECTION 7. No claim being presented in the three months subsequent to the publication of the advertisement prescribed in sub-section (c) of Section five, the things save shall be sold at public auction, and their proceeds, after deducting the expenses and the proper reward shall be deposited in the insular treasury. If three years shall pass without anyone claiming it, one-half of the deposit shall be adjudged to him who saved the things, and the other half to the insular government. SECTION 8. The following shall have no right to a reward for salvage or assistance: a. The crew of the vessel shipwrecked or which was is danger of shipwreck; b. He who shall have commenced the salvage in spite of opposition of the captain or his representative; and c. He who shall have failed to comply with the provisions of Section three. SECTION 9. If, during the danger, an agreement is entered into concerning the amount of the reward for salvage or assistance, its validity may be impugned because it is excessive, and it may be required to be reduced to an amount proportionate to the circumstances. SECTION 10. In a case coming under the last preceding section, as well as in the absence of an agreement, the reward for salvage or assistance shall be fixed by the Court of First Instance of the province where the things salvaged are found, taking into account principally the expenditures made to recover or save the vessel or the cargo or both, the zeal demonstrated, the time employed, the services rendered, the excessive express occasioned the number of persons who aided, the danger to which they and their vessels were exposed as well as that which menaced the things recovered or salvaged, and the value of such things after deducting the expenses. Reasons for allowing salvage compensation to salving vessel: to reward promptness, energy, efficiency and heroic endeavor in saving life and property in peril, etc., but however, meritorious and worthy of praise be the action and cooperation of the officers and the crew of the salving vessel, it is of capital importance to take into consideration the use and service of the said vessel as an indispensable instrument for the salvage, as well as the danger to which it was exposed SECTION 11. From the proceeds of the sale of the things saved shall be deducted, first, the expenses of their custody, conservation, advertisement, and auction, as well as whatever taxes or duties they should pay for their entrance; then there shall be deducted the expenses of salvage; and from the net amount


- � -69remaining shall be taken the reward for the salvage or assistance which shall not exceed fifty per cent of such amount remaining. SECTION 12. If in the salvage or in the rendering of assistance different persons shall have intervened the reward shall be divided between them in proportion to the services which each one may have rendered, and, in case of doubt, in equal parts. Those who, in order to save persons, shall have been exposed to the same dangers shall also have a right to participation in the reward. Here, more than 1 person has intervened If in a first vessel, passengers were at the point of death, a second vessel rescues them, will the second vessel be entitled to salvage? No, because rescuing human beings is an act of humanity. One is duty-bound to save persons. This is according to jurisprudence. SECTION 13. If a vessel or its cargo shall have been assisted or saved, entirely or partially, by another vessel, the reward for salvage or for assistance shall be divided between the owner, the captain, and the remainder of the crew of the latter vessel, so as to give the owner a half, the captain a fourth, and all the remainder of the crew the other fourth of the reward, in proportion to their respective salaries, in the absence of an agreement to the contrary. The express of salvage, as well as the reward for salvage or assistance, shall be a charge on the things salvaged on their value. SECTION 14. This Act shall take effect on its passage. Enacted: February 4, 1916 CONTRACT OF TOWAGE A contract whereby one vessel, usually motorized, pulls another, whether loaded or not with merchandise, from one place to another, for a compensation. It is a contract for services rather than a contract of carriage.

RULES ON SALVAGE REWARD 1. The reward is fixed by the RTC judge in the absence of agreement or where the latter is excessive. (Sec. 9) 2. The reward should constitute a sufficient compensation for the outlay and effort of the salvors and should be liberal enough to offer an inducement to others to render services in similar emergencies in the future. 3. 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 latter does 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) 4. If a vessel is the salvor, the reward shall be distributed as follows: a. 50% to the shipowner;

b. 25% to the captain; and c. 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, being a duty of humanity and not for reward. 4 accidents in maritime law: collision, shipwreck, arrival under stress, general average Shipwreck is applicable to salvage law because it’s a derelict In towage, there is no shipwreck (Thus, not covered) Generally salvage may be defined as a service which one person renders to the owner of a ship or goods by his own labor, preserving the goods or ship which the owner or those entrusted with the care of them have either abandoned in distress at sea or are unable to protect and secure. It is found on the equity of remunerating private and secure. It is found on the equity of remunerating private individual services performed in saving, in whole or in part, a ship or its cargo from impending peril, or of recovering them after actual loss. It is a compensation for actual services rendered to the property charged with it, and is allowed for meritorious conduct of the salvor and in consideration of a benefit conferred upon the person whose property he has saved. Three elements are necessary to a valid salvage claim: (a) a marine peril; (b) service voluntarily rendered when not required as an existing duty or from special contract; (c) success, in whole or in part, or that the services rendered contributed to such success. Compensation as salvage is not viewed by the admiralty courts merely as pay on the principle of quantum meruit or as a remuneration pro opere et labore, but as a reward given for perilous services, voluntarily rendered, and as an inducement to mariners to embark in such dangerous enterprises to save life and property. The amount should be liberal enough to cover the expenses and to give an extra sum as a reward for the services rendered. There is no fixed rule for salvage allowance. The allowance rests in the sound discretion of the court or judge who hears the case, hears the witnesses testify, and is acquainted with the environments in golden scales, but should be made as a reward for meritorious voluntary services, rendered at a time when danger of loss is imminent and for the purpose of encouraging others in like services. A salvor, in the view of the maritime law, has an interest in the property; this is called a lien, but it never goes, in the absence of a contract expressly made, upon the idea of a debt due by the owner to the salvor for services rendered, but upon the principle that the service creates a property in the thing saved. He is, to all intents and purposes, a joint owner and if the property is lost he must bear his share like the other joint owners. A derelict is defined as "A ship or her cargo which is abandoned and deserted at sea by those who were in charge of it, without any

hope of recovering it (sine spe recuperandi), or without any

intention of returning to it (sine animo revertendi). If those in charge left within the intention of returning, or of procuring assistance, the property is not derelict, but if they quitted the property with the intention of finally leaving it, it is derelict, and a change of their intention and an attempt to return will not change of their intention and an attempt to return will not change its nature. When a vessel is found at sea, deserted, and has been abandoned by the master and crew without the intention of returning and resuming possession, she is, in the sense of the law, derelict, abandoned, and the finder who take possession with the intention of saving her gains a right of possession which he can maintain against the true owner. The owner does not, indeed, renounce his right of property. This is not presumed to be his intention, nor does the finder acquire any such right. But the owner does abandon, temporarily, his right of possession, which is transferred to the finder who becomes bound to preserve the property with good faith and bring it to a place of safety for the owner's use; and he acquires a right to be paid for his services a reasonable and proper compensation out of the property itself. He is not bound to part with the possession until it is paid, or the property is taken into the

SALVAGE

TOWAGE

Governed by special law (Act No.

2616)

Governed by Civil Code on

contract of lease

Requires success, otherwise no

payment

Success is not required

Must be done with the consent of

the captain/crewmen

Only the consent of the

tugboat owner is needed

Vessel must be involved in an

accident

Vessel need not be involved in

an accident

Fees distributed among crewmen Fees belong to the tugboat

owner


- � -70possession of the law preparatory to the amount of salvage being legally ascertained. The evidence proves that the Nippon was in peril; that the captain left in order to protect his life and the lives of the crew; that the animo revertendi was slight. The argument of the defendant-appellant to the effect that the ship was in no danger is a bit out of place in view of the statement of the captain that she would sink with the first gale, coupled with the fact that a typhoon was the cause of her stranding. The abandonment of a vessel by all on board, when the vessel is in peril, will justify third parties in taking possession with the bona fide intention of saving the vessel and its cargo for its owners. The mental hope of the master and the crew will in no way affect the possession nor the right to salvage. The salvage was conducted with skill, diligence and efficiency. Capt. Robinson, who was the only one of the experts who had had any experience in handling wet copra, unqualifiedly approved Manila as a base for operations. Lebreton, a stevedore, testified that he would have gotten some of his materials from Hongkong but that he would have freighted the salved cargo to Manila. All other things being equal, the fact that Hongkong is forty sailing hours from Scarborough Reef while Manila is less than twenty-four sailing hours would make Manila by far the more logical base. Some of the witnesses contended that other methods should have been used. They testified that "grabs" or "clam shells" would have brought better results, but none of these witnesses had had any experience in unloading wet copra. Capt. Robinson was the only witness called who had had any experience in this class of work. He testified that the only way all the copra could be gotten out was by sacks or by canvas slings; that "grabs" would be of no use because of the inability to work with them between decks. The copra was in three layers. The top layer was dry, the middle layer was submerged every time the tide rose, and the lower layer was submerged all of the time. It was manifestly impossible to keep these layers separate by using "grabs" or "clam shells." The estimates of the experts with regard to the time necessary to remove the cargo ranged from eight to twenty days. The greater portion of the cargo was brought in by the plaintiffs within fifteen days. The delay after June 5 was due to the difficulty in inducing laborers to work with wet copra. This difficulty would have arisen with any set of salvors and cannot be attributed to a lack of care or diligence on the part of the plaintiffs. (Erlanger & Galinger v. Swedish Asiatic) There was no marine peril to justify a valid salvage. Although the defendant's vessel was in a helpless condition due to engine failure, it did not drift too far from the place where it was. The weather was fair, clear, and good. The waves were small and too slight, so much so, that there were only ripples on the sea, which was quite smooth. During the towing of the vessel there was moonlight. Although said vessel was drifting towards the open sea, there was no danger of it floundering or being stranded, as it was far from any island or rocks. In case of danger of stranding, its anchor could released, to prevent such occurrence. There was no danger that defendant's vessel would sink, in view of the smoothness of the sea and the fairness of the weather. Said vessel or its crew did not even find it necessary to lower its launch and two motor boats, in order to evacuate its passengers aboard. Neither did they find occasion to jettison the vessel's cargo as a safety measure. Neither the passengers nor the cargo were in danger of perishing. All that the vessel's crew members could not do was to move the vessel on its own power. That did not make the vessel a quasi-derelict, considering that even before the appellant extended the help to the distressed ship, a sister vessel was known to be on its way to succor it. It can be considered a contract of towage. In consenting to plaintiff's offer to tow the vessel, defendant (through the captain of its vessel MV Don Alfredo) thereby impliedly entered into a juridical relation of "towage" with the owner of the vessel MV Henry I, captained by plaintiff, the William Lines, Incorporated. Tug which put line aboard liberty ship which was not in danger or peril but which had reduced its engine speed because of hot grounds, and assisted ship over bar and, thereafter, dropped towline and stood by while ship proceeded to dock under own power, was entitled, in absence of written agreement as to amount to be paid for services, to payment for towage services, and not for salvage services. The distinction between salvage and towage is of importance to the crew of the salvaging ship, for the following reasons: If the

contract for towage is in fact towage, then the crew does not have any interest or rights in the remuneration pursuant to the contract. But if the owners of the respective vessels are of a salvage nature, the crew of the salvaging ship is entitled to salvage, and can look to the salvaged vessel for its share. As the vessel-owner, William Lines, Incorporated, had expressly waived its claim for compensation for the towage service rendered to defendant, it is clear that plaintiff, whose right if at all depends upon and not separate from the interest of his employer, is not entitled to payment for such towage service. (Barrios v. Go Thong) The services rendered by the launch Triton are more in the nature of salvagerather than towage. A vessel, though not abandoned, may be the subject of salvage if at the time the services were rendered there was a probable, threatening danger of the vessel or its cargo being damaged. On the date of the occurrence, there was such an imminent danger (there was a typhoon and it was feared that there would be a flood and consequently strong current in the river) and that the barangay needed assistance in her trip downstream to Aparri. Mere towage service is confined to vessels that have received no injury or damage, and mere towage reward is payable in those cases only where the vessel receiving the service is in the same condition she would ordinarily be in without having encountered any damage or accident. If the vessel towed is by this means aided in escaping from a present or prospective danger, the service will be regarded as one of salvage, and the towage as merely an incident. If, on the other hand, the vessel thus assisted is not encompassed by any actual or probable danger, and the employment is simply for the purpose of expediting the voyage, such service is towage and not salvage. There is no negligence on the part of the patron of the launch with respect to the rope. It was used exclusively for towing and emergency purposes. Although it was 2 years old, it was never used very often. The barangay was not overloaded. The trial court merely confused gross tonnage with deadweight. That La Granja did not use the bigger launch “Delfin” is not negligence. The said launch was not available at that time. The crew was not on board, and “Delfin” was not suited to rescue the barangay which was the in shallow waters. The patron of the launch was not wanting in the exercise of the degree of caution and skill which prudent navigators usually employ. He had been a master of a tug-boat and had navigated for 20 years. He is qualify to take that course which, according to his experience, has proved safe in entering the Appagonan Creek. • When towage failed, it gave rise to a situation for salvage. (Alhambra Cigar v. La Granja) A vessel which undertakes a towage service is liable for reasonable care of the tow, and that reasonable care is measured by the dangers and hazards to which the tow is or may be exposed, which it is the duty of the master of the tug to know and to guard against not only by giving proper instructions for the management of the tow, but by watching her when in a dangerous locality, to see that his directions are obeyed. The duty of the tug to a tow is a continuous one from the time service commences until it is completed. Its responsibility includes not only the proper and safe navigation of the tug on the journey, but to furnish safe, sound and reasonable appliances and instrumentalities for the service to be performed, as well as the giving of proper instructions as to the management of the tow; and if the locality in which the two finds itself at any given time is more than ordinarily dangerous, the tug is held to a proportionately higher degree of care and skill. It is well recognized that in towing a boat built only for the shallow water of an inland stream, as the cascos mentioned in this case are, greater care must necessarily be used when venturing upon an ocean voyage than with a vessel fitted for deep water; and this applies not only in the choice of routes, to select the one having the smoothest water and affording shelter is stormy weather, but in the handling of the tow. In the case at bar the defendant failed to meet any of these requirements; it neglected to furnish suitable appliances and instrumentalities; for the tug itself, as is demonstrated by the facts in this case, was unsuitable for the purpose in hand. As we have said, it is negligence to leave two heavily loaded cascos in Manila Bay at the mercy of weather likely to exist in the month of August for a distance of 1,500 meters with no other motive power than bamboo poles. Also the captain of the Matulin failed to give


- � -71proper instructions to the tow. If it was negligence not to provide himself with appliances by which the cascos could be protected while passing from the mouth of the river to the launch, it was negligence for him to ask the cascos to move out into the open sea under such circumstances. It is clear, therefore, that the defendant directly or through the captain failed in every duty laid upon it by the law, even though the law applicable under the facts and circumstances of this case require the use of only ordinary diligence and care; but, as a matter of fact, the law required the exercise of more than ordinary care under the circumstances existing at the time the cascos were lost. The fact of time and season and of the probability that in coming out of the river they would be met with wind and wave and, in their helpless condition, would in all probability, if so met, be driven on the shoals, made the situation of the cascos one of more than ordinary danger; and the tug should be held to a proportionately higher degree of care and skill. While the captain of the Matulin would not have been responsible for an act of God by which the cascos were lost, it was his duty to foresee what the weather was likely to be, and to take such precautions as were necessary to protect his tow. It was not an act of God by which the cascos were lost; it was the direct result of the failure of the captain of the Matulin to meet the responsibilities which the occasion placed on him. To be exempt from liability because of an act of God the tug must be free from any previous negligence or misconduct by which that loss or danger may have been occasioned. For, although the immediate or proximate cause of the loss in any given instance may have been what is termed an act of God, yet, if the tug unnecessarily exposed the two to such accident by any culpable act or omission of its own, it is not excluded. (Limpangco v. Yangco Steamship)

PUBLIC SERVICE ACT What is the nature of a certificate of public convenience? Certificate of public convenience and necessity? A certificate of public convenience constitutes neither a franchise nor a contract, confers no property rights, and is a mere license or privilege, and such privilege is forfeited when the grantee fails to comply with his commitments behind which lies the paramount interest of the public, for public necessity cannot e made to wait, nor sacrificed for private convenience. Certificate of public convenience represent property rights to the extent that if the rights which any public utility is exercising pursuant to lawful orders of the Public Utility Commissioner has been invaded by another public utility, in appropriate cases actions may be maintained by the complainant public utility. (Agbayani) The primordial consideration in granting franchises or certificates of public convenience is public interest. PURPOSES: 1. To secure adequate, sustained service for the public at the least possible cost; 2. To protect the public against unreasonable charges and poor, inefficient service; 3. To protect and secure investments in public services; 4. 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 a certificate of public convenience and necessity. EXCEPTIONS: 1. Warehouses; 2. Animal drawn vehicles and bancas moved by oar or sail; 3. Airships, except for the fixing of maximum rates for fare and freight; 4. Radio companies, except for rates fixing; 5. Public services owned or operated by the government, except as to rates fixing; 6. Ice plants; and 7. Public markets. PUBLIC SERVICE A person who owns, operates, manages or controls in the Philippines for hire or compensation, with general or limited clientele, whether permanent, occasional or accidental, and done for general business

purposes, any common carrier or public utility, 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 to serve 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. 1 and other issuances. It has been replaced by the following government agencies: LTO; LTFRB; ATO; BOE; NTC; NEA; ERB; NWRC; CAB; and MIA.

A CPC or a CPCN constitutes neither a franchise nor a contract, confers no property right, and is a mere license or a privilege. The holder of said certificate does not acquire a property right in the route covered thereby. Nor does it confer upon the holder any proprietary right or interest or franchise in the public highways. Revocation of this certificate deprives him of no vested right. New and additional burdens, alteration of the certificate, or even revocation or annulment thereof is reserved to the State. (Luque vs. Villegas, 30 SCRA 408) The law requires that there be a proper notice and hearing before the Commissioner can exercise any of the 15 powers enumerated in this section. (Agbayani) The power to cancel or revoke a certificate may be exercised by the Commission even without a formal charge, with the only limitation that the holder of the certificate should be given his day in court. (Perez citing Collector of Internal Revenue v. Estate of F. P. Buan) 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 1. Applicant must be a citizen of the Philippines or a corporation or entity 60% of the capital of which is owned by such citizens; 2. Applicant must prove public necessity; 3. Applicant must prove that the operation of the public service proposed and the authorization to do business will promote the public interest on a proper and suitable manner; 4. Applicant must have sufficient financial capability to undertake the proposed services and meeting the responsibilities incident to its operation. The Commission shall have the power, without previous hearing: (1) to investigate, upon its own initiative, or upon complaint in writing, any matter concerning any public service as regards matters under its jurisdiction; (2) to require any public service to furnish safe, adequate, and proper service as the public interest may require and warrant; (3) to enforce compliance with any standard, rule, regulation, order or other requirement of this Act or of the Commission, and to prohibit or prevent any public service from operating without having first secured a certificate of public convenience or public necessity and convenience; and

C e r t i f i c a t e o f P u b l i c Convenience

Certificate of Public Necessity

I s s u e d w h e n e v e r t h e Commission f inds that the operation of the proposed public service will promote the public interests in a proper and suitable manner, for which a municipal or legislative franchise is not necessary

Issued upon approval of any franchise or privilege granted by any political subdivision of the Philippines when in the judgment o f t he Commiss ion , such franchise or privilege will properly conserve the public interest


- � -72(4) to require existing public services to pay the fee provided in this Act for the issuance of the proper certificate under penalty of the revocation and cancellation of the acquired right (Perez citing Sec. 17[a]) The following are some cases in which no notice and hearing are necessary: (Agbayani) (5) the order is a mere order of investigation preparatory to the final hearing and decision of the application (6) the modification of the certificate is only in form and not in substance (7) the order is merely to give additional time to register vehicles (8) an order for good cause suspending for a period not to exceed 30 days any certificate or the exercise of any right or authority issued or granted under this Act by order of the Commission, whenever such step shall be necessary to avoid serious and irreparable damage or inconvenience to the public or to private interests (9) the authorized line of the oppositor are different from those applied for by the applicant, the former cannot be considered to have substantial interest in the application so as to require his personal notification of the hearing

UNLAWFUL ACTS OF PUBLIC UTILITY COMPANIES 1. Engagement in public service business without first securing the proper certificate; 2. Providing or maintaining unsafe, improper or inadequate service as determined by the proper authority; 3. Committing any act of unreasonable and unjust preferential treatment to any particular person, corporation or entity as determined by the proper authority; 4. Refusing or neglecting to carry public mail upon request. (Secs. 18 and 19) ACTS REQUIRING PRIOR APPROVAL 1. Establish and maintain individual or joint rates;

2. Establish and operate new units; 3. Issue free tickets; 4. Issue any stock or stock certificates representing an increase of capital; 5. Capitalize any franchise in excess of the amount actually paid to the Government; 6. Sell, alienate, mortgage or lease property, certificates or franchise. Under Sec. 20(g) of C.A. No. 146, the sale, etc. may be negotiated and completed before the approval by the proper authority. Its approval is not a condition precedent to the validity of the contract. The approval is necessary only to protect public interest. The water transport service between Matnog and Allen is not a ferry boat service but a coastwise or interisland shipping service. Before private respondent may be issued a franchise or CPC for the operation of the said service as a common carrier, it must comply with the usual requirements of filing an application, payment of the fees, publication, adducing evidence at a hearing and affording the oppositors the opportunity to be heard, among others, as provided by law. (San Pablo v. Pantranco South Express, Inc.) The supervening passage of the RA 9295 and the filing by the shipping company of an application for a new CPC under the new law rendered the previous MARINA decision and the old CPC of no consequence, there was no more justiciable controversy for the CA to decide and no remedy to grant or deny. Due deference should have been given to the exercise by the MARINA of its sound administrative discretion in applying its special knowledge, experience and expertise to determine the technical and intricate factual matters relating to the new CPCs of a shipping corporation. (Sta. Clara Shipping v. San Pablo) What is the “PRIOR OPERATOR RULE”? “Prior operator rule” means that before permitting a new operator to invade the territory of another already established with a certificate of public convenience, the prior operator must first be given the opportunity to extend its service in order to meet public needs in the manner of transportation. It means that a public utility operator should be shielded from ruinous competition by affording him an opportunity to improve his equipment and service before allowing a new operator to serve the same territory he covers. (Perez citing Mandaluyong Bus v. Francisco, Javier v. Orlanes) The rule allowing an existing franchised operator to invoke a preferential right within the authorized territory as long as he renders satisfactory and economical service. The policy is not to issue a certificate to a second operator to cover the same field and in competition with a first operator who is rendering sufficient, adequate and satisfactory service. The prior operator must first be given an opportunity to improve its service, if inadequate or deficient. Purpose: To prevent ruinous and wasteful competition in order that the interests of the public would be conserved and preserved. It subordinates the prior applicant rule which gives the first applicant priority only if things and circumstances are equal. Where the operator either fails or neglects to make the improvement or effect the increase in services, especially when given the opportunity, new operators should be given the chance to give the services needed by the public. The "prior operator" and "protection of investment" rules cannot prevail over the convenience of the public. At present, there is no ice plant in any of the municipalities of Casiguran, Juban, Magallanes and Irosin, where a great demand for ice exists, as can be gleaned from the successive increase in the productive capacity of respondent company's ice plant from 2 tons in 1948 to 7 tons in 1950 and to 13.5 tons in 1952. 21 Said "protection of investment" rule is not absolute, for nobody has exclusive right to secure a franchise or a certificate of public convenience. 22 It cannot be applied unqualifiedly for that would

POWERS REQUIRING PRIOR

NOTICE AND HEARING

POWERS EXERCISABLE

WITHOUT PRIOR NOTICE AND

HEARING

1. Issuance o f CPC or

CPCN;

2. Fixing of rates, tolls, and

charges;

3. Setting up of standards

and classifications;

4. Establishment of rules to

secure accuracy of all

meters and all measuring

appliances;

5. I s s u a n c e o f o r d e r s

requiring establishment or

maintenance of extension

of facilities;

6. R e v o c a t i o n , o r

modification of CPC or

CPCN;

7. Suspension of CPC or

CPCN, except when it is

necessary to avoid serious and

i r r e p a r a b l e d a m a g e o r

inconvenience to the public or

private interest, in which case,

a suspension not more than 30

days may be ordered, prior to

the hear ing. (Sor iano v.

Medina, 164 SCRA 36)

1. Investigation any matter

concerning public service;

2. Requir ing operators to

furnish safe, adequate, and

proper service;

3. Requiring public services to

p a y e x p e n s e s o f

investigation;

4. Valuation of properties of

public utilities;

5. Examination and test of

measuring appliances;

6. Grant of special permits to

make extra or special trips

in territories specified in the

certificate;

7. Uniform accounting system

and furnishing of annual

reports;

8. Compelling compliance with

the laws and regulations.


- � -73encourage violation or disregard of the terms and conditions of the certificate and the Commission's directives and regulations, and would close the door to other applicants who could establish, operate and provide adequate, efficient and satisfactory service for the benefit and convenience of the inhabitants. (Martires Ereno v. Public Service Commission) What is the “PRIOR APPLICANT RULE”? Presupposes a situation when two interested persons apply for a certificate to operate a public utility in the same community over which no person has as yet granted any certificate. If it turns out, after the hearing, that the circumstances between the two applicants are more or less equal, then the applicant who applied ahead of the other, will be granted the certificate. RATE-FIXING POWER The rate to be fixed must be just, founded upon conditions which are fair and reasonable to both the owner and the public. A rate is just and reasonable if it conforms to the following requirements: 1. One which yields to the carrier a fair return upon the value of the property employed in performing the service; and 2. One which is fair to the public for the service rendered. What is the “Registered Owner Rule”? The registered owner of a certificate of public convenience is liable to the public for the injuries or damages suffered by third persons caused by the operation of said vehicle, even though the same had been transferred to a third person. The registered owner is not allowed to escape responsibility by proving that a third person is the actual and real owner Reason: It would be easy for him, by collusion with others or otherwise, to transfer the responsibility to an indefinite person, or to one who possesses no property with which to respond financially for the damage or injury done. (Erezo, et al. vs. Jepte 102 Phil 103). Kabit System: A system whereby a person who has been granted a certificate of public convenience allows other persons who own motor vehicles to operate under such license, for a fee or percentage of such earnings. It is void and inexistent under Art. 1409, Civil Code. Effects: 1. The transfer, sale, lease or assignment of the privilege granted is valid between the contracting parties but not upon the public or third persons. (Gelisan vs. Alday, 154 SCRA 388) 2. The registered owner is primarily liable for all the consequences flowing from the operations of the carrier. ? The public has the right to assume that the registered owner is the actual or lawful owner thereof. It would be very difficult and often impossible, as a practical matter, for the public to enforce their rights of action that they may have for injuries inflicted by the vehicle if they should be required to prove who the actual owner is. (Benedicto vs. IAC, 187 SCRA 547) 3. The thrust of the law in enjoining the kabit system is to identify the person upon whom responsibility may be fixed with the end in view of protecting the riding public (Lim vs. CA 373 SCRA 394). 4. The registered owner cannot recover from the actual owner and the latter cannot obtain transfer of the vehicle to himself, both being in pari delicto. (Teja Marketing vs. IAC) 5. For the better protection of the public, both the registered owner and the actual owner are jointly and severally liable with the driver. (Zamboanga Transportation Co. vs. CA) What is the “Protection of investment rule”? “Protection of investment rule” means that one of the purposes of the Public Service Law is to protect and conserve investments which have already been made for that purpose by public service operators. Said rule however, is not absolute, for nobody has an exclusive right to secure a franchise or a certificate of public convenience. The paramount consideration should always be the public interest and public convenience. (Perez citing Batangas Trans. Co. v. Orlanes, Rizal Light & Ice Co., Inc. v. Mun. of Morong, Rizal)

What is the “Ruinous or unfair competition”? Mere possibility of reduction in the income of an existing operator holding a public service permit does not, of itself, establish that issuing a permit to another to operate within the same territory will result in ruinous competition. To prove the latter, it should be shown that the oppositor will not obtain sufficient profits to pay a dividend or reasonable interest upon invested capital. (Perez citing Halili v. Ice and Cold Storage Industries) Nor could an unfair or ruinous competition result from the authorization of the ice plant applied for. In order that the opposition based on ruinous competition may prosper, it must be shown that the oppositor would be deprived of fair profits on the capital invested in its business. The mere possibility of reduction in the earnings of a business is not sufficient to prove ruinous competition. It must be shown that the business would not have sufficient gains to pay a fair rate of interest on its capital. (Martires Ereno, Supra.) NOTE: Don’t forget to study the Beaufort Scale.

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