transpo law reviewer

7/29/2019 Transpo Law Reviewer

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San Beda College of Law54

MEMORYAIDIN COMMERCIAL LAW

TRANSPORTATION LAWS

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

obligates to transport persons, goods, or both, fromone place to another, by land, air or water, for aprice or compensation.

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

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

COMMON CARRIER Persons, corporations, firms or associations

engaged in the business of carrying or transportingpassengers or goods or both, by land, water, or air,for compensation, offering their services to the public(Art. 1732, Civil Code). Art. 1732 of the New Civil Code avoids anydistinction between one whose principal businessactivity is the carrying of persons or goods or bothand one who does such carrying only as an ancillaryactivity (sideline). It also avoids a distinctionbetween a person or enterprise offeringtransportation service on a regular or scheduled basisand one offering such service on an occasional,episodic or unscheduled basis.

Neither does the law distinguish between acarrier offering its services to the general public thatis the general community or population and one who

offers services or solicits business only from a narrowsegment of the general population.

A person or entity is a common carrier even ifhe did not secure a Certificate of Public Convenience(De Guzman vs. CA, 168 SCRA 612). It makes no distinction as to the means oftransporting, as long as it is by land, water or air. Itdoes not provide that the transportation should be bymotor vehicle. (First Philippine Industrial Corporationvs. CA) One is a common carrier even if he has no fixedand publicly known route, maintains no terminals,and issues no tickets (Asia Lighterage Shipping, Inc.vs. CA).

Characteristics:1. Undertakes to carry for all people indifferently

and thus is liable for refusal withoutsufficient reason (Lastimoso vs. Doliente,October 20, 1961);

2. Cannot lawfully decline to accept a particularclass of goods for carriage to the prejudiceof the traffic in these goods;

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

4. Provides public convenience.

PRIVATE CARRIER One which, without being engaged in the businessof carrying as a public employment, undertakes todeliver goods or passengers for compensation.(Home Insurance Co. vs. American Steamship

Agency, 23 SCRA 24)

TESTS WHETHER CARRIER IS COMMON ORPRIVATE: The SC in First Philippine Industrial Corporationvs. CA (1995) reiterated the following tests:

1. It must be engaged in the business ofcarrying goods for others as a publicemployment and must hold itself out asready to engage in the transportation ofgoods generally as a business and not as acasual occupation;

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

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

4. The transportation must be for hire. In National Steel Corp. vs. CA (1997) the SC heldthat the true test of a common carrier is the carriageof goods or passengers provided it has space for allwho opt to avail themselves of its transportation for afee.

COMMON CARRIER PRIVATECARRIER1. As to availability

Holds himself out for allpeople indiscriminately

Contracts with particularindividuals or groups only

2. As to required diligence

Extraordinary diligence isrequired

Ordinary diligence isrequired

3. As to regulation

Subject to Stateregulation

Not subject to Stateregulation

4. Stipulation limiting liability

Parties may not agree onlimiting the carriersliability except whenprovided by law

Parties may limit thecarriers liability,provided it is notcontrary to law, moralsor good customs

5. Exempting circumstance

Prove extraordinarydiligence and Art. 1733,NCC

caso fortuito, Art. 1174NCC

6.Presumption of negligence

There is a presumption offault or negligence No presumption of faultor negligence

7.Governing law

Law on common carriers Law on obligations andcontracts

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

1. Civil Code - primary2. Code of Commerce (Arts. 349, 379, 573-

734, 580, 806-845) - suppletory

B. Internat ional / foreign/overseas (Fore igncountry to Phil ippines) Applicable to Water/maritime and Air

COMMERCIAL LAW COMMITTEECHAIRPERSON: Garny Luisa Alegre ASST. CHAIRPERSON:Jayson OS Ramos EDP: Beatrix I. Ramos SUBJECT HEADS:Marichelle De Vera (Negotiable Instruments Law); Jose Fernando Llave (Insurance); Aldrich Del Rosario(Transportation Laws);Shirley Mae Tabangcura, Bon Vincent Agustin (Corporation Law); Karl Steven Co (Special Laws); John Lemuel Gatdula(Banking Laws); Robespierre CU (Law on Intellectual Property)


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transportation The law of the country of destination generallyapplies.

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

3. Others - suppletorya. Water/maritime: Carriage of Goods by

Sea Act (COGSA)b. Air: Warsaw Convention

I. NEW CIVIL CODE(Arts. 1732-1766)RE QUI REME NT O F E XT RA ORDI NA RYDILIGENCE Rendition of service with the greatest skill andutmost foresight. (Davao Stevedore Co. v.Fernandez)

Rationale:1. From the nature of the business and for

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

duty4. Possession of the goods5. Preciousness of human life

A common carrier is not an absolute insurer of allrisks of travel.

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

PASSENGER A person who has entered into a contract ofcarriage, express or implied, with the carrier. They

are entitled to extraordinary diligence from thecommon carrier. The following are not considered passengers, andare entitled to ordinary diligence only:

a. One who has not yet boarded any part of a

vehicle regardless of whether or not hehas purchased a ticket;

b. One who remains on a carrier for anunreasonable length of time after he hasbeen afforded every safe opportunity toalight;

c. One who has boarded by fraud, stealth, ordeceit;

d. One who attempts to board a movingvehicle, although he has a ticket, unless

the attempt be with the knowledge andconsent of the carrier;

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

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

g. One who rides any part of the vehiclewhich is unsuitable or dangerous or whichhe knows is not designed or intended forpassengers.

DEFENSES OF A COMMON CARRIER IN THECARRIAGE OF GOODS1. CASO FORTUITO/FORCE MAJEURE

Requisites:

a. Must be the proximate and only cause of theloss

b. Exercise of due diligence to prevent or minimizethe loss before, during or after the occurrenceof the disaster (Art. 1739)

c. Carrier has not negligently incurred in delay intransporting the goods (Art. 1740)

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

2. ACTS OF PUBLIC ENEMY

Requisites:a. Must be the proximate and only cause ofthe lossb. Exercise of due diligence to prevent orminimize the loss before, during or after the actcausing the loss, deterioration or destruction ofthe goods (Art. 1739)

3. NEGLIGENCE OF THE SHIPPER OR OWNERa. Sole and proximate cause: absolute defenseb. Contributory: partial defense. (Art. 1741)

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

Even if the damage should be caused by theinherent defect/character of the goods, the commoncarrier must exercise due diligence to forestall orlessen the loss.(Art. 1742) The carrier which, knowing the fact of improper

packing of the goods upon ordinary observation, stillaccepts the goods notwithstanding such condition, isnot relieved of liability or loss or injury resultingtherefrom. (Southern Lines, Inc. v. CA, 4 SCRA 258)

5. ORDER OR ACT OF PUBLIC AUTHORITY

Said public authority must have the power to issuethe order (Art. 1743). Consequently, where theofficer acts without legal process, the common carrierwill be held liable. (Ganzon v. CA 161 SCRA 646) Diligence in the selection and supervision ofemployees under Article 2180 of the Civil Codecannot be interposed as a defense by the commoncarrier because the liability of the carriers arises fromthe breach of the contract of carriage. The defense

under said articles is applicable to negligence inquasi-delicts under Art. 2176. (Del Prado v. ManilaElectric Co., 52 Phil 900)

LIABILITY OF A COMMON CARRIER FORDEATH OR INJURIES TO PASSENGERS DUETO ACTS OF ITS EMPLOYEES AND OTHERPASSENGERS OR STRANGERS

FOR ACTS OF ITSEMPLOYEESFOR ACTS OFOTHER PASSENGERSOR STRANGERS

Required diligence and defense

Extraordinary diligence Ordinary diligence

Nature of liability



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Tort; however,The employee must beon duty at the time ofthe act. (Maranan v.Perez)

Not absolute; limited byArt. 1763 The carrier is liable when its personnel allowed a

passenger to drive the vehicle causing it to collidewith another vehicle resulting to the injuries sufferedby the other passengers. (MRR vs. Ballesteros, 16

SCRA 641)

CARRIAGE OF GOODS CARRIAGE OF PASSENGERSParties

1. Common carrier2. Shipper3. Consignee

1. Common carrier2. Passenger

Cause of l iabil ityDelay in delivery, loss, destruction, or deterioration ofthe goods

Death or injury to the passengers

Duration of liabilityFrom the time the goods are unconditionally placed inthe possession of, and received by the carrier for

transportation until the same are delivered actually orconstructively by the carrier to the consignee or to theperson who has the right to receive them. (Art. 1736)

It remains in full force and effect even when they aretemporarily unloaded or stored in transit unless theshipper or owner has made use of the right of stoppagein transitu. (Art. 1737)

It continues to be operative even during the time thegoods are stored in a warehouse of the carrier at theplace of destination until the consignee has bee advisedof the arrival of the goods and has had reasonableopportunity thereafter to remove them or otherwisedispose of them. (Art. 1738) Delivery of goods to the custom authorities is notdelivery to the consignee. (Lu Do v. Binamira, 101 Phil120)

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

the trip, but for so long as the passengers are within itspremises and where they ought to be in pursuance tothe contract of carriage. (LRTA v. Navidad, [2003])

All persons who remain on the premises within areasonable time after leaving the conveyance are to bedeemed passengers, and what is a reasonable time ora reasonable delay within this rule is to be determinedfrom all the circumstances, and includes a reasonabletime to see after his baggage and prepare for hisdeparture. (La Mallorca v. CA, 17 SCRA 739 ; AbiotizShipping Corporation v. CA, 179 SCRA 95)

It is the duty of common carriers of passengers tostop their conveyances a reasonable length of time inorder to afford passengers an opportunity to enter, andthey are liable for injuries suffered from the suddenstarting up or jerking of their conveyances while doingso. The duty which the carrier of passengers owes toits patrons extends to persons boarding the cars aswell as to those alighting therefrom (Dangwa TransCo., Inc. vs. CA 202 SCRA 574).Presumption of negligence

Art.1735 Civil CodeReason: As to when and how goods were damaged intransit is a matter peculiarly within the knowledge of thecarrier and its employees. (Mirasol v. Dollar, 53 PHIL124)

Mere proof of delivery of goods to a carrier in goodorder and the subsequent arrival of the same goods atthe place of destination in bad order makes for a prima

facie case against the carrier. (Coastwise LighterageCorp. v. CA, 245 SCRA 796)

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



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Defenses1. Ordinary circumstance: Exercise of

extraordinary diligence (Art. 1735)2. Special circumstances:

a. Flood, storm, earthquake, lighting, orother natural disaster or calamity (plusforce majeure)

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

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

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

e. Order or act of competent publicauthority (Art. 1734)

1. Exercise of extraordinary diligence (Art.1756)

2. Caso fortuito

Valid st ipulations1. Reduction of degree of diligence to ordinary diligence,provided it be:

a) In writing, signed by the shipper or owner;b) Supported by a valuable consideration otherthan the service rendered by the carriers; and

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

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

The diligence required in the carriage of the goodsmay be reduced by only one degree, from extraordinaryto ordinary diligence or diligence of a good father of afamily. (Art. 1744, Art. 1745, no. 4)

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

(Art. 1758)

Void s tipulations1. That the goods are transported at the risk of theowner or shipper;

2. That carrier will not be liable for any loss,destruction or deterioration of the goods;3. That the carrier need not observe any diligence inthe custody of the goods;4. That the carrier shall exercise a degree ofdiligence less than that of a good father of a familyover the movable transported;5. That the carrier shall not be responsible for theacts or omissions of his or its employees;6. That the carriers liability for acts committed bythieves or robbers who do not act with grave orirresistible threat, violence or force is dispensed with ordiminished;7. That the carrier is not responsible for the loss,destruction or deterioration of the goods on account of

the defective condition of the car, vehicle, ship or

Dispensing with or lessening the extraordinary

responsibility of a common carrier for the safety ofpassengers imposed by law by stipulation, by postingof notices, by statements on tickets or otherwise. (Art.1757)



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other equipment used in the contract of carriage. (Art.1745)



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RULES ON PASSENGERS BAGGAGEIN THE CUSTODY OFTHE PASSENGERS(HAND-CARRIED)

IN THE CUSTODYOF THE COMMONCARRIER(CHECKED-IN)Legal nature of the baggage

Necessary deposit Considered as goods Required diligence by the common carrierDiligence of a depositary(ordinary diligence)

Extraordinary diligence

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

CONCURRING CAUSES OF ACTION ARISINGFROM THE NEGLIGENT ACT OF THE COMMONCARRIER1. Culpa contractual(breach of contract)

Only the carrier is primarily liable and not thedriver, because there is no privity between the driverand the passenger.

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

2. Culpa aquiliana(quasi-delict)

The carrier and driver are solidarily liable as jointtortfeasors.

Basis: Art. 2180, NCC.

Defense of due diligence in the selection andsupervision of employees is available. Exception:maritime tort resulting in collision. (See notes onCollision)

3. Culpa criminal(criminal negligence)

The driver is primarily liable. The carrier is

subsidiarily liable only if the driver is convicted anddeclared insolvent.

Basis: Art. 100, RPC.

In case of injury to a passenger due to thenegligence of the driver of the bus on which he isriding and of the driver of another vehicle, the driversas well as the owners of the two vehicles are jointlyand severally liable for damages. It makes nodifference that the liability of the bus driver andowner springs from contract while that of the ownerand driver of the other vehicle arises from quasi-delict. (Fabre vs. CA)

LIMITATIONS AS TO CARRIERS LIABILITYINVALID AS BEINGCONTRARY TO PUBLICPOLICY

VALID &ENFORCEABLE1. One exempting thecarrier from any and allliability for loss or damageoccasioned by its ownnegligence.2. An unqualified limitationof liability to an agreedvaluation.

1. One limiting theliability of the carrier toan agreed valuation,unless the shipperdeclares a higher valueand pays a higher rateof freight(H.E. Heacock Companyvs. Macondray &Company Inc.)

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

or loss was caused by its own negligence.(Shewaram vs. PAL, 17 SCRA 606)

SPECIAL RULES ON LIABILITES OF AIRLINECARRIERS1. In case of flight diversion due to bad weather orother circumstances beyond the pilots control, therelation between the carrier and the passengercontinues until the latter has been landed at the portof destination and has left the carriers premises. Thecarrier should necessarily exercise extraordinarydiligence in safeguarding the comfort, convenienceand safety of its stranded passengers until they havereached their final destination. (Philippine Airlines vs.CA, 226 SCRA 423)2. Even where overbooking of passengers is allowedas a commercial practice, the airline company wouldstill be guilty of bad faith and still be liable fordamages if it did not properly inform passenger thatit could breach the contract of carriage even if theywere confirmed passengers. (Zalamea vs. CA, 228SCRA 23)3. An open-dated ticket constitutes a completecontract between the carrier and passenger. Hence,the airline company is liable if it refused to confirm apassengers flight reservation. (Singson vs. CA, 282SCRA 149)4. An airline company which issued a confirmed ticketto a passenger covering successive trips on differentairlines can be held liable for damages occasioned bybumping off by one of the successive airlines.(Lufthansa German Airlines vs. CA, 238 SCRA 290)5. An airline ticket providing that carriage bysuccessive air carriers is to be regarded as a singleoperation is to make the issuing carrier liable for thetortuous conduct of the other carrier. A printed

provision in the ticket limiting liability only to its ownconduct is not enough to rebut that liability. (KLMRoyal Dutch Airlines vs. CA, 65 SCRA 237)

II. CODE OF COMMERCEA. OVERLAND TRANSPORTATION

(Arts. 349-379)Applicability1. Domestic land and water/maritime transportation.(Pandect of Commercial Law and Jurisprudence,Justice Jose Vitug, 1997 ed.)

2. Domestic Air Transportation. (Commercial LawReview, Cesar Villanueva, 2004 ed.)

IMPORTANT CONCEPTS:1. Bill of lading2. Obligations of the carrier3. Right of abandonment4. Notice of damage5. Combined carrier agreement

BILL OF LADING The written acknowledgment of receipt of goodsand agreement to transport them to a specific placeto a person named or to his order.

Rules:1. It is not indispensable for the creation of a

contract of carriage. (Compania Maritima vs.

Insurance Company of North America, 12 SCRA 213)


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

3. The consignee, although the instrument is

oftentimes drawn up only by the consignor andcarrier, becomes bound by all the stipulationscontained therein by making a claim for loss on thebasis of said bill of lading. (Sea-Land Services Inc.vs. IAC)

4. The right of a party to recover for loss of shipmentconsigned to him under a bill of lading drawn up onlyby and between the shipper and the carrier, springsfrom either a relation of agency between him and theshipper, or his status as stranger in whose favorsome stipulation is made in said contract, and whobecomes a party thereto when he demandsfulfillment of that stipulation. (Art. 1311 (2),(Mendoza vs. PAL Inc.)

5. Acceptance of the bill of lading without dissentraises the presumption that all the terms thereinwhere brought to the knowledge of the shipper andagreed to by him and, in the absence of fraud ormistake; he is estopped from thereafter denying thathe assented to such terms. (Notes and Cases on theLaw on Transportation and Public Utilities, Aquino, T.& Hernando, R.P. 2004 ed. p.261)

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

been actually placed aboard the ship withvery reasonable expectation that theshipment is as good as on its way.

2. Received - one in which it is stated that

the goods have been received for shipmentwith or without specifying the vessel bywhich the goods are to be shipped.

3.Negotiable - one in which it is stated that

the goods referred to therein will be deliveredto the bearer or to the order of any personnamed therein.

4.Non-negotiable - One in which it is stated

that the goods referred to therein will bedelivered to a specified person.

5. Clean One which does not indicate any

defect in the goods.

6. Foul One which contains a notation

thereon indicating that the goods covered by

it are in bad condition.

7. Spent One which covers goods that

already have been delivered by the carrierwithout a surrender of a signed copy of thebill.

8. Through One issued by the carrier who is

obliged to use the facilities of other carriersas well as his own facilities for the purpose oftransporting the goods from the city of theseller to the city of the buyer, which bill oflading is honored by the second and otherinterested carriers who do not issue their ownbills.

9. Custody One wherein the goods are

already received by the carrier but the vessel

indicated therein has not yet arrived in theport.

10. Port One which is issued by

the carrier to whom the goods have beendelivered, and the vessel indicated in the bill

of lading by which the goods are to beshipped is already in the port where thegoods are held for shipment.

Functions:1. Best evidence of the existence of the contract of carriage ofcargo (Art. 353)2. Document of title

3. Receipt of cargo4. Contract totransport and deliver goods as stipulated5. Symbol of thegoods

OBLIGATIONS OF THE CARRIERA. Duty to accept the goodsGENERAL RULE: A common carrier cannotordinarily refuse to carry a particular class of goods.

EXCEPTION: For some sufficient reason thediscrimination against the traffic in such goods isreasonable and necessary. (Fisher vs. YangcoSteamship Co. 31 Phil 1). Instances when the carrier may validly refuse toaccept the goods include the ff:1.) Goods sought to be transported are dangerousobjects, or substances including dynamite and otherexplosives2.) Goods are unfit for transportation3.) Acceptance would result in overloading4.) Contrabands or illegal goods

5.) Goods are injurious to health6.) Goods will be exposed to untoward danger likeflood, capture by enemies and the like7.) Goods like livestock will be exposed to disease8.) Strike9.) Failure to tender goods on time. (Notes andCases on the Law on Transportation and PublicUtilities, Aquino, T. & Hernando, R.P. 2004 ed. p.68)

In case of carriage by railway, the carrier isexempted from liability if carriage is insisted upon bythe shipper, provided its objections are stated in thebill of lading.

However, when a common carrier accepts cargofor shipment for valuable consideration, it takes therisk of delivering it in good condition as when it wasloaded. (PAL vs. CA)

B. Duty to deliver the goods Not only to transport the goods safely but to theperson indicated in the bill of lading. The goodsshould be delivered to the consignee or any otherperson to whom the bill of lading was validlytransferred or negotiated.

Time of deliveryStipulated inContract/Bill ofLading

No stipulation

1. Carrier is bound tofulfill the contract and isliable for any delay; no

matter from what cause

1. Within a reasonabletime.2. Carrier is bound to

forward them in the 1st


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it may have arisen. shipment of the same orsimilar goods which hemay make to the point ofdelivery. (ART. 358 Codeof Commerce)

Effects of delaya. Merely suspends and generally

does not terminate the contractof carriage

b. Carrier remains duty bound toexercise extraordinary diligence

c. Natural disaster shall not freethe carrier from responsibility(Art.1740)

d. If delay is without just cause,the contract l imiting thecommon carriers liability cannotbe availed of in case of loss ordeterioration of the goods

(Art.1747)

RIGHT OF CONSIGNEE TO ABANDON GOODS Instances:

1. Partial non-delivery,where the goodsare useless withoutthe others (Art.363);

2. Goods are rendereduseless for sale orconsumption forthe purposes forwhich they areproperly destined(Art. 365); and

3. In case of delaythrough the fault ofthe carrier (Art.371).

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

1. Domestic/inter-island/coastwise transportation2. Land/water/airtransportation3. Carriage of goods4. Goods shipped aredamaged

Rules:a. Patent damage: shipper must file a claim against

the carrier immediately upon delivery (it may beoral or written)

b. Latent damage: shipper should file a claim againstthe carrier within 24 hours from delivery.Note: These rules does not apply to misdelivery of

goods. (Roldan vs. Lim Ponzo)

Purpose of notice: To inform the carrier that theshipment has been damaged, and it is charged withliability therefore, and to give it an opportunity tomake an investigation and fix responsibility while thematter is fresh.

The filing of notice of claim is a conditionprecedent for recovery. Shorter period may be stipulated by the partiesbecause it merely affects the shippers remedy and

does not affect the liability of the carrier.(PHILAMGEN vs. Sweetlines, Inc.)Prescriptive Period Not provided by Article 366. Thus, in suchabsence, Civil Code rules on prescription apply.

If despite the notice of claim, the carrier refusesto pay, action must be filed in court.

1. No bill of lading was issued:

within 6 years2. Bill of lading was issued: within10 years.

ARTICLE 366 COGSA Sec.3 (6)Applicability1. Domestic

/inter-island/coastwisetransportation

2. Land,

water, airtransportation

3. Carriageof goods

1. International/overseas/foreign (fromforeign country toPhils.)Note: subject to the ruleon Paramount Clause2. Water/maritime

transportation3. Carriage of goods

Notice of damage1.Co

2.24

1.Not

2.3-

Prescriptive periodNone provided; CivilCode applies.

One year from the dateof delivery (delivered

but damaged goods), ordate when the vesselleft port or from thedate of delivery to thearrastre (non-delivery orloss).

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

EXCEPTION:A combined carrier agreement wherea carrier makes itself liable assuming the obligationsand acquiring as well the rights and causes of actionof those which preceded it.

A. MARITIME COMMERCE(Arts. 573-869)

IMPORTANT CONCEPTS:1. Merchant vessel2. Maritime lien and Preference of Credit3. Doctrine of limited liability4. Causes of revocation of voyage5. Participants in maritime commerce6. Charter party7. Loans on bottomry and respondentia8. Accidents in maritime commerce

MARITIME/ADMIRALTY LAW It is the system of laws which particularly relates


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to the affairs and business of the sea, to ships, theircrews and navigation, and to maritime conveyance ofpersons and property. (Notes and Cases on the Lawon Transportation and Public Utilities, Aquino &Hernando, citing Francisco, p.254)

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

Arrastre service is not maritime in character. Itrefers to a contract for the unloading of goods from avessel. (ICTSI vs. Prudential Guarantee, 320 SCRA244)

CHARACTERISTICS OF MARITIMETRANSACTION1. Real - similar to transactions over real propertywith respect to effectivity against third persons whichis done through registration. (Rubiso vs. Rivera, 37Phil. 72). The evidence of real nature is shown by:1) the limitation of the liability of the agents to theactual value of the vessel and the freight money; and2) the right to retain the cargo and embargo anddetention of the vessel (Luzon Stevedoring Corp v.CA, 156 SCRA 169);2. Hypothecary - the liability of the owner of thevalue of the vessel is limited to the vessel itself(Doctrine of Limited Liability).

The real and hypothecary nature of maritime lawsimply means that the liability of the carrier inconnection with losses related to maritime contractsis confined to the vessel, which stands as theguaranty for their settlement. (Aboitiz Shipping Corp.vs. General Accident Fire and Life Assurance Corp.

217 SCRA 359).

MERCHANT VESSEL Vessel engaged in maritime commerce, whetherforeign or otherwise. (Bar Review Materials inCommercial Law, Jorge Miravite, 2002 ed.)

Constitutes property which may be acquired andtransferred by any of the means recognized by law.They shall continue to be considered as personalproperty. (Arts. 573, 585)

They are susceptible to maritime lienssuch as forthe repair, equipping and provisioning of the vesselin the preparation of a voyage, as well as mortgageliabilities, in satisfaction of which a vessel may bevalidly arrested and sold. (Ship Mortgage Decree of

1978)

MARITIME LIEN It constitutes a present right of property in theship, a jus in re, to be afterward enforced inadmiralty by process in rem. (PNB vs. CA, 337 SCRA381)

If the maritime lien arose prior to the recording ofa preferred mortgage, it shall have priority over thesaid mortgage lien. (PNB vs. CA, 337 SCRA 381)

ORDER OF PREFERENCE IN CASE OF SALE OFVESSELR.A. 6106 P.D. 1521

Effectivity date1969 1978Applicability

Overseas shipping only Both domestic andoverseas shipping

Kind of saleJudicial Judicial and extrajudicialOrder of Preference

A preferred mortgageshall have priority overall claims against thevessel, except thefollowing preferences inthe order stated:1. Judicial costs of theproceedings;2. Taxes due thePhilippine Government;3. Salaries and wages ofthe Captain and Crew of

the vessel during its lastvoyage;4. General average orsalvage includingcontract salvage,bottomry loans, andindemnity due shippersfor the value of goodstransported but whichwere not delivered tothe consignee;5. Costs of repair andequipment of thevessel, and provisioningof food, supplies andfuel during its lastvoyage; and6. Preferred mortgagesregistered prior in time.

The preferred mortgagelien shall have priorityover all claims againstthe vessel, except thefollowing preferences inthe order stated:1. Expenses and feesallowed and costs taxedby the court and taxesdue to the Government;2. Crews wages;3. General average;

4. Salvage, includingcontract salvage;5. Maritime liens arisingprior in time to therecording of thepreferred mortgage;6. Damages arising outof tort; and7. Preferred mortgageregistered prior in time.

Effect of sale: All pre-existing claims in the vesselare terminated. They will then be satisfied from theproceeds of the sale subject to the order ofpreference.

DOCTRINE OF LIMITED LIABILITY(HYPOTHECARY RULE) Cases where applicable:

1. Art. 587 civilliability for indemnities to third persons

2. Art. 590 indemnities from negligent acts of thecaptain (not the shipowner or ship agent)3. Art. 837 collision4. Art. 643 liabilityfor wages of the captain and the crew andfor advances made by the ship agent if thevessel is lost by shipwreck or capture

GENERAL RULE:The liability of shipowner and shipagent is limited to the amount of interest in saidvessel such that where vessel is entirely lost, theobligation is extinguished. (Luzon Stevedoring v.Escano, 156 SCRA 169) The interest extends to: 1)the vessel itself; 2) equipments; 3) freightage; and4) insurance proceeds. (Chua v. IAC, 166 SCRA 183)


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EXCEPTIONS:1. Claims under Workmens Compensation (Abueg

vs. San Diego 77 Phil 730);

2. Injury or damage due to shipowner or to the

concurring negligence of the shipowner and the

captain;3. The vessel is insured (Vasquez vs. CA 138 SCRA

553).

4. Expenses for repair on vessel completed before

loss;

5. In case there is no total loss and the vessel is

not abandoned;

6. Collision between two negligent vessels;

Abandonment of the vessel is necessary to limitthe liability of the shipowner. The only instance wereabandonment is dispensed with is when the vessel isentirely lost (Luzon Stevedoring vs. CA 156 SCRA169).

RIGHT OF SHIPOWNER OR SHIP AGENT TOABANDON VESSEL Instances:

1. In case of civil liability from indemnities tothird persons (Art. 587);

2. In case of leakage of at least of thecontents of a cargo containing liquids (Art.687); and

3. In case of constructive loss of the vessel(Sec. 138, Insurance Code).

RIGHT OF ABANDONMENTSHIPOWNER OR SHIPAGENT CONSIGNEE

What may be abandonedVessel Goods shippedInstances

1. In case of civil liabilityfrom indemnities to thirdpersons (Art. 587);2. Sec. 138, InsuranceCode;3. In case of leakage ofat least of thecontents of a cargocontaining liquids (Art.687)

1. Partial non-delivery,where the goods areuseless without theothers (Art. 363);2. Goods are rendereduseless for sale orconsumption for thepurposes for which theyare properly destined(Art. 365); and3. In case of delaythrough the fault of the

carrier (Art. 371).Effects1. Transfer of

ownership ofthe vesselfrom theshipowner tothe shippers orinsurer.

2. In case of (2),the insurermust pay theinsured as ifthere wasactual total

loss of the

1. Transferofownership on thegoodsfrom theshipperto thecarrier.

2. Carriershouldpay theshipper

the

vessel. marketvalue ofthegoods atthe point

ofdestination.

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

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

an entire cessation for the time being of alltrade whatever.2. Blockade A sortof circumvallation of a place by which all foreignconnection and correspondence is, as far ashuman power can effect it, to be cut off.3. Embargo A proclamation or order of a state, usually issuedin time of war or threatened hostilities,prohibiting the departure of ships or goods fromsome or all the ports of such state until furtherorder.

PARTICIPANTS IN MARITIME COMMERCEA. Shipowners and ship agentsB. Captains and masters of the vessel

C. Officers and crew of the vesselD. SupercargoesE. Pilot

A. SHIPOWNERS AND SHIP AGENTSShipowner (proprietario) Person who has possession, control andmanagement of the vessel and the consequent rightto direct her navigation and receive freight earnedand paid, while his possession continues.

Ship agent (naviero) Person entrusted with provisioning andrepresenting the vessel in the port in which it may befound; also includes the shipowner.

Not a mere agent under civil law; he is solidarilyliable 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 thevessel, and all that relate to the requirements ofnavigation;

4. Order a new voyage, make a new charter orinsure the vessel after obtaining authorizationfrom the shipowner or if granted in certificate ofappointment.


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Civi l L iabi l it ies of the Shipowner And ShipAgent1. 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 thevessel without prejudice to their right to freethemselves from liability by abandoning thevessel to the creditors. (Art. 587)

Duty of Ship Agent to Discharge the Captainand Members of the Crew If the seamen contract is not for a definite periodor voyage, he may discharge them at his discretion.(Art. 603)

If for a definite period, he may not dischargethem 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 provennegligence. (Art. 605)

B. CAPTAINS AND MASTERS They are the chiefs or commanders of ships.

The terms have the same meaning, but areparticularly used in accordance with the size of thevessel 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 thegovernment of the country under whoseflag he navigates.

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

Inherent powers:1. Appoint crew in the absence of ship agent;2. Command the crew and directthe vessel to its port of destination;3. Impose correctional punishment

on those who, while on board vessel, failto comply with his orders or are wanting indiscipline;4. Make contracts for the charter of vessel in the absence of ship agent.5. Supply, equip, and provision thevessel; and6. Order repair of vessel to enableit to continue its voyage. (Art. 610)

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

1. From the consignee of thevessel;2. From the consignee of thecargo;

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 ofthe Code of Commerce;2. Keep a Log Book, AccountingBook and Freight Book;3. Examine the ship before thevoyage;4. Stay on board during the loadingand unloading of the cargo;5. Be on deck while leaving orentering the port;6. Protest arrivals under stress andin case of shipwreck;7. Follow instructions of and renderan accounting to the ship agent;8. Leave the vessel last in case of wreck;9. Hold in custody properties leftby deceased passengers and crewmembers;10. Comply with the requirements of customs, health, etc. at the port of arrival;11. Observe rules to avoid collision;

12. Demand a pilot while entering or

leaving a port.(Art. 612) A ships captain must be accorded a reasonablemeasure of discretionary authority to decide what thesafety of the ship and of its crew and cargospecifically requires on a stipulated ocean voyage(Inter-Orient Maritime Enterprises Inc. vs. CA).

No liability for the following:1. Damages caused to the vesselor to the cargo by force majeure;2. Obligations contracted for therepair, equipment, and provisioning of thevessel unless he has expressly boundhimself personally or has signed a bill ofexchange or promissory note in his name.(Art. 620)

Solidary Liabilit ies of the ShipAgent /Shipowner for Acts Done by theCaptain towards Passengers and Cargoes1. Damages to vessel and to cargodue to lack of skill and negligence;

2. Thefts and robberies of thecrew;3. Losses and fines for violation of laws;4. Damages due to mutinies;5. Damages due to misuse of power;6. For deviations;7. For arrivals under stress;8. Damages due to non-observance of marine regulations. (Art.618)

C. OFFICERS AND CREW1. Sailing Mate/First Mate

2. Second Mate


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3. Engineers4. Crew

No liability under the following circumstances:1. If, before beginning voyage, captain attempts to

change it, or a naval war with the power to

which the vessel was destined occurs;2. If a disease breaks out and be officially declared

an epidemic in the port of destination;3. If the vessel should change owner or captain.

(Art. 647)

Sailing Mate/First Mate Second chief of the vessel who takes the place ofthe captain in case of absence, sickness, or deathand shall assume all of his duties, powers andresponsibilities. (Art. 627)

Duties:1. Provide himself with maps andcharts with astronomical tables necessaryfor the discharge of his duties;2. Keep the Binnacle Book;3. Change the course of thevoyage on consultation with the captainand the officers of the boat, following thedecision of the captain in case ofdisagreement;4. Responsible for all the damagescaused to the vessel and the cargo byreason of his negligence. (Arts. 628 - 631)

Second Mate Takes command of the vessel in case of theinability or disqualification of the captain and thesailing mate, assuming in such case their powers andresponsibilities.

Third in command

Duties:1. Preserve the hull and rigging of the vessel;2. Arrange well the cargo;3. Discipline the crew;4. Assign work to crew members;5. Inventory the rigging andequipment of the vessel, if laid up. (Art.632)

Engineers Officers of the vessel but have no authority exceptin matters referring to the motor apparatus. Whentwo or more are hired, one of them shall be the chiefengineer.

Duties:1. In charge of the motorapparatus, spare parts, and otherinstruments pertaining to the engines;2. Keep the engines and boilers ingood condition;3. Not to change or repair theengine without authority of the captain;4. Inform the captain of anydamage to the motor apparatus;5. Keep an Engine Book;6. Supervise all personnelmaintaining the engine. (Art. 632)

Crew

The aggregate of seamen who man a ship, or theships company.

Hired by the ship agent, where he is present andin his absence, the captain hires them, preferringFilipinos, and in their absence, he may take in

foreigners, but not exceeding 1/5 of the crew. (Art.634)

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

Just Causes for the Discharge of SeamanWhile Contract Subsists1. Perpetration of a crime;2. Repeated insubordination, want of discipline;3. Repeated incapacity and negligence;4. Habitual drunkenness;5. Physical incapacity;6. Desertion. (Art. 637)

Rules in case of Death of a Seaman The seamans heirs are entitled to payment asfollows:1. If death is natural:

a. compensation up to time of death if engaged on wageb. if by voyage - half of amount if death occurs on voyage out; and full, if onvoyage inc. if by shares - none, if beforedeparture; full, if after departure

2. if death is due to defense of vessel - fullpayment;

3. if captured in defense of vessel - full payment;

4. if captured due to carelessness - wages up tothe date of the capture. (Art. 645)

Complement of t he Vessel All persons on board, from the captain to thecabin boy, necessary for the management,maneuvers, and service, thus including the crew, thesailing mates, engineers, stokers and otheremployees on board not having specific designations.

Does not include the passengers or the personswhom the vessel is transporting.

D. SUPERCARGOES Persons who discharges administrative dutiesassigned to him by ship agent or shippers, keeping

an account and record of transaction as required inthe accounting book of the captain. (Art. 649)

E. PILOT A person duly qualified, and licensed, to conduct avessel into or out of ports, or in certain waters.

The term generally connotes a person taken onboard at a particular place for the purpose ofconducting a ship through a river, road or channel, orfrom a port.

Master pro hac vice for the time being in thecommand and navigation of the ship.

While in exercising his functions a pilot is in solecommand of the ship and supersedes the master forthe time being in the command and navigation of theship, the master does not surrender his vessel to the


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pilot and the pilot is not the master. There areoccasions when the master may and should interfereand even displace the pilot, as when the pilot isobviously incompetent or intoxicated (Far EasternShipping Company vs. CA).

Compulsory Pilotage States possessing harborshave enacted laws or promulgated rules requiringvessels approaching their ports to take on boardpilots licensed under the local laws. (Notes andCases on the Law on Transportation and Public

Utilities, Aquino, T. & Hernando, R.P. 2004 ed. p.518)

Liablity of Pi lotGENERAL RULE: On compulsory pilotage grounds,the Harbor Pilot is responsible for damage to a vesselor to life or property due to his negligence.

EXCEPT:1. Accident caused by force majeure or naturalcalamity provided the pilot exercised prudence andextra diligence to prevent or minimize damages.2. Countermand or overrule by the master of the

vessel in which case the registered owner of thevessel is liable. (Sec.11, Art.III PPA Admin Order 03-85)

SPECIAL CONTRACTS OF MARITIMECOMMERCE1. Charter party2. Bill of lading3. Contract of transportation of passengers

on sea voyages4. Loan on bottomry5. Loan on respondentia6. Marine insurance

CHARTER PARTY A contract by virtue of which the owner or agentbinds himself to transport merchandise or persons fora fixed price.

A contract by which an entire ship, or someprincipal part thereof is let/leased by the owner toanother person for a specified time or use. (PlantersProducts, Inc. vs. CA, 226 SCRA 476)

Parties:1. Ship owner or ship agent2. Charterer

Classes:1. Bareboat or demise The charterer provides crew,food and fuel. The charterer is liable as if he werethe owner, except when the cause arises from the

unworthiness of the vessel. The shipowner leases tothe charterer the whole vessel, transferring to thelatter the entire command, possession andconsequent control over the vessels navigation,including the master and the crew, who therebybecome the charters servants. It transforms acommon carrier into a private carrier.

The charterer becomes the owner of thevessel pro hac vice, just for that one particularpurpose only. Because the charterer is treatedas owner pro hac vice, the charterer assumesthe customary rights and liabilities of theshipowner to third persons and is held liable forthe expense of the voyage and the wages of theseamen.

2. Contract of Affreightment A contract whereby

the owner of the vessel leases part or all of its spaceto haul goods for others.

The shipowner retains the possession,command and navigation of the ship, thecharterer merely having use of the space in the

vessel in return for his payment of the charterhired.

Kinds:

a. Time

charter vessel is chartered for a fixedperiod of time or duration of voyage.b. Voyage or trip charter the vessel is leased forone or series of voyages usually forpurposes of transporting goods forcharterer.

LEASE CHARTER PARTYIf for a definite period,lessee cannot give up

the lease by paying aportion of the amountagreed upon.

Charterer may rescindcharter party by paying

half of the freightageagreed upon.

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

The new owner is notcompelled to respect thecharter party so long ashe can load the vesselwith his own cargo. (Art.689)

Civil law concept Commercial law concept

CHARTER PARTY BILL OF LADINGAn entire or complete

contract.

More like a private

receipt which the captaingives to accredit goodsreceived from persons

Consensual contract Real contract

BAREBOAT ORDEMISE CHARTER CONTRACT OFAFFREIGHTMENT(TIME OR VOYAGECHARTER)Charterer becomes liableto others caused by itsnegligence

Owner remains liable ascarrier and must answerfor any breach of duty

Charterer regarded asowner pro hac vice forthe voyage

Charterer is not regardedas owner.

Owner of vesselrelinquishes possession,command and navigationto charterer

The vessel owner retainspossession, commandand navigation of theship

Common carrier isconverted to privatecarrier.

Common carrier is notconverted to a privatecarrier.

PERSONS WHO MAY MAKE A CHARTER1. Owner or owners of the vessel, either in

whole or in majority part, who have legalcontrol and possession of the vessel

2. Charterer may subcharter entire vessel to


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3rd person only if not prohibited in originalcharter. (Art.679)

3. Ship agent if authorized by the owner/s orgiven such power in the certificate ofappointment. (Art.598)

4. Captain in the absence of the ship agentor consignee and only if he acts inaccordance with the instructions of theagent or owner and protects the lattersinterests. (Art.609)

REQUISITES OF A VALID CHARTER PARTY1. Consent of the contracting parties2. Existing vessel which should be placed at

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

Commerce

Clauses Which May Be Included In a CharterPartyJason clause Clause paramount orparamount clause

A stipulation in a charterparty that in case of amaritime accident forwhich the shipowner isnot responsible by law,contract or otherwise,the cargo shippers,consignees or ownersshall contribute with the

shipowner in generalaverage. (Pandect ofCommercial Law andJurisprudence, JusticeJose Vitug, 1997 ed.)

A clause in a charterparty providing that theCOGSA shall apply, eventhough thetransportation isdomestic, subject to theextent that any term ofthe bill of lading isrepugnant to the COGSA

or applicable law, then tothe extent thereof theprovision of the bill oflading is void. (Pandectof Commercial Law andJurisprudence, JusticeJose Vitug, 1997 ed.)

Rights and Obligations of PartiesSHIPOWNER OR SHIPAGENT CHARTERER

1. If thevessel ischarteredwholly,not toacceptcargofromothers;

2. Toobserverepresented

capacity;

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

3. Tounloadcargoclandestinely

placed4. To

substitute anothervessel ifload isless than3/5 of capacity;

5. To leavethe portif thechartererdoes notbring thecargowithinthe laydays andextra laydaysallowed;

6. To placein avessel inaconditiontonavigate;

7. to bringcargo to

nearestneutralport incase ofwar orblockade.(Arts.669-678)

Rescission of a Charter PartyAtcharterersrequest(Art 688)

Atshipownersrequest(Art. 689)

Fortuitouscauses(Art. 690)

1. Byabandoning thecharter andpaying half ofthe freightage;2. Error intonnage orflag;3. Failure toplace thevessel at thecharterersdisposal;4. Return ofthe vessel due

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

1. War orinterdiction ofcommerce;2. Blockade;3. Prohibition toreceive cargo;4. Embargo;and5. Inability ofthe vessel tonavigate.


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to pirates,enemies or badweather;5. Arrival at aport for repairs.

Terms:1. Primage - bonus tobe paid to the captain after the successfulvoyage.2. Demurrage thesum fixed in the charter party as aremuneration to the owner of the ship for thedetention of his vessel beyond the number ofdays allowed by the charter party for loading orunloading or for sailing.3. Deadfreight theamount paid by or recoverable from a chartererof a ship for the portion of the ships capacitythe latter contracted for but failed to occupy.

4. Lay Days - daysallowed to charter parties for loading andunloading the cargo.

5. Extra Lay Days days which follow after the lay days haveelapsed.

USUAL FORMS OF CONSUMMATINGCONTRACTS1. C.I.F. cost, insurance and freight;2. F.O.B. - free on board;3. F.A.S. - free alongside ship; and4. C. & F. - cost and freight.

TRANSSHIPMENT OF GOODS The act of taking cargo out of one ship andloading it in another, or the transfer of goods fromthe vessel stipulated in the contract of affreightmentto another vessel before the place of destinationnamed in the contract has been reached, or thetransfer for further transportation from one ship orconveyance to another. It is not dependent on the ownership of thetransporting ships or in the change of carriers, butrather on the fact of actual physical transfer of cargofrom one vessel to another.

If done without legal excuse, however competentand safe the vessel into which the transfer is made,is a violation of contract and infringement of right ofshipper and subjects carrier to liability if freight is lostevent by cause otherwise excepted. (MagellanManufacturing vs. CA, 201 SCRA 102)LOAN ON BOTTOMRY AND RESPONDENTIA A real, unilateral, aleatory contract, by virtue ofwhich one person lends to another a certain amountof money or goods on things exposed to maritimerisks, which amount, with its earnings, is to bereturned if the things are safely transported, andwhich is lost if the latter are lost.

LOAN ONBOTTOMRY LOAN ONRESPONDENTIADefinition

Loan made byshipowner or ship agentguaranteed by vesselitself and repayableupon arrival of vessel at

destination. (Art. 719)

Loan taken on securityof the cargo laden on avessel, and repayableupon safe arrival ofcargo at destination.

(Art. 719)

Who may contract

Shipowner or shipagent. Outside of theresidence of the owners- the captain.

Only the owner of thecargo.

Common elements:1. Exposure of security to marine peril;2. Obligation of the debtor conditioned only upon

safe arrival of the security at the point ofdestination.

Forms:1. Public instrument

2. Policy signed by the contracting parties andthe 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 UsuryLaw

Subject to Usury Law

Liability of the borroweris contingent on thesafe arrival of thevessel or cargo atdestination

Not subject to anycontingency (absoluteliability)

The last lender is apreferred creditor

The first lender is apreferred creditor

WHEN LOAN ON BOTTOMRY ORRESPONDENTIA REGARDED AS SIMPLE LOAN1. Lender loaned an amount larger than the

value of the object due to fraudulentmeans employed by the borrower.(ART.726)

2. Full amount of the loan is not used for thecargo or given on the goods if all of themcould not have been loaded, the balancewill be considered a simple loan. (ART.727)

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


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

MARINE INSURANCE LOAN ONBOTTOMRY ORRESPONDENTIAIndemnity is paid after theloss has occurred

Indemnity is paid inadvance by way of aloan

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

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

Consensual contract Real contract

Hypothecary Nature of Bottomry/RespondentiaGENERAL RULE:The obligation of the borrower topay the loan is extinguished if the goods given assecurity are absolutely lost by reason of an accidentof the sea, during the voyage designated, and if it isproven that the goods were on board.

EXCEPTIONS:

1. Loss due to inherent defect;2. Loss due to the barratry on the part of the

captain;3. Loss due to the fault or malice of the borrower;4. The vessel was engaged in contraband; and5. The cargo loaded on the vessel be different in

from that agreed upon.

Concurrence of Marine Insurance and Loanon Bottomry/Respondentia1. The insurable interest of the owner of a

ship hypothecated by bottomry is only theexcess of the value over the amountsecured by bottomry. (Sec. 101, InsuranceCode)

2. The value of what may be saved in case ofshipwreck shall be divided between thelender and the insurer in proportion to theinterest of each one. (Art. 735)

Note: If a vessel is hypothecated by bottomry onlythe excess is insurable, since a loan on bottomrypartakes of the nature likewise of an insurancecoverage to the extent of the loan accommodation.

The same rule would apply to the hypothecation ofthe cargo by respondentia. (Pandect of CommercialLaw and Jurisprudence, Justice Jose Vitug, 1997 ed.)

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

AVERAGE An extraordinary or accidental expense incurredduring the voyage in order to preserve the cargo,vessel or both, and all damages or deteriorationsuffered 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 mustcontribute to reimburse the damage caused orexpense incurred if the situation constitutes generalaverage.

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

Where both vessel and cargo are saved, it isgeneral average; where only the vessel or only thecargo is saved, it is particular average.

Expenses incurred to refloat a vessel, whichaccidentally ran aground, in order to continue itsvoyage, do not constitute general average. Not onlyis there absence of a marine peril, common safetyfactor, and deliberateness. It is the safety of theproperty, and not the voyage, which constitutes thetrue foundation of general average. (A. Magsaysay,Inc. vs. Agan, G.R.No. L-6393, Jan. 31, 1955)

PARTICULAR ORSIMPLE GROSS OR GENERALDefinitionDamages or expensescaused to the vessel orcargo that did not inureto the common benefit,and borne by respectiveowners. (Art. 809)

Damages or expensesdeliberately caused inorder to save the vessel,its cargo or both fromreal and known risk.(Art. 811)Requisites1. common danger;2. deliberate

sacrifice;3. success;4. proper formalities

and legal steps.Liabil ityThe owner of the goodswhich gave rise to theexpense or suffered thedamage shall bear thisaverage. (Art. 810)

All the persons havingan interest in the vesseland the cargo therein atthe time of theoccurrence of theaverage shall contributeto satisfy this average.(Art. 812) The insurers(Art.859) and lenderson bottomry andrespondentia shalllikewise contribute.

(Art.732).Number of interests involvedOnly one interestinvolved

Several interestsinvolvedShare in the damage or expense

100% share In proportion to thevalue of the ownersproperty savedRight to recover

No reimbursement There may bereimbursementKinds (not exclusive)

Art. 809 Art. 811Procedure for recovery1. Assembly and


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deliberation2. Resolution of the

captain3. Entry of the

resolution in the

logbook4. Detailed minutes5. Delivery of the

minutes to themaritime judicialauthority of thefirst port, within 24hours from arrival,

6. Ratification bycaptain underoath. (Arts. 813-814)

GOODS NOT COVERED BY GENERALAVERAGE EVEN IF SACRIFICED1. Goods carried on deck. (ART.855)2. Goods not recorded in the books or

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

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

Jettison Act of throwing cargo overboard in order tolighten the vessel.

Order of goods to be cast overboard:1. Those which are on the deck,preferring the heaviest one with the leastutility and value;

2. Those which are below the

upper deck, beginning with the one withgreatest weight and smallest value. (Art.815)

Jettisoned goods are not res nullius nor deemedabandoned within the meaning of civil law so as tobe the object of occupation by salvage. (Pandect ofCommercial Law and Jurisprudence, Justice JoseVitug, 1997 ed.)

In order that the jettisoned goods may beincluded in the gross or general average, theexistence of the cargo on board should be proven bymeans of the bill of lading. (Art. 816)

York-Antwerp (Y-A) Rules on DeterminingLiabil ity for Averages With Regard To DeckCargo

1. Deck cargo is allowed only indomestic/coastwise/inter-island shipping,and is prohibited ininternational/overseas/foreign shipping.

2. If deck cargo is loaded with the consentof the shipper on overseas trade, it mustalways contribute to general average,but should the same be jettisoned, itwould not be entitled to reimbursementbecause there is violation of the Y-ARules.

3. If deck cargo is loaded with the consentof the shipper on coastwise shipping, itmust always contribute to general

average and if jettisoned would beentitled to reimbursement.

Reason: In domestic shipping, voyages are usuallyshort and the seas are generally not rough. Inoverseas shipping, the vessel is exposed for many

days to perils of the sea.

DOMESTIC INTERNATIONALDeck cargo is allowed Deck cargo is not

allowed

With shippers consent

General average Particular average

Without shippers consent

Captain is liable Captain is liable

ARRIVAL UNDER STRESS (ARRIBADA) The arrival of a vessel at the nearest and mostconvenient port instead of the port of destination, ifduring the voyage the vessel cannot continue the tripto the port of destination.

When lawful Whenunlawful Who bearsexpenses:The inability tocontinuevoyage is dueto lack of provisions,well-foundedfear of seizure,privateers,pirates, oraccidents ofthe sea

disabling it tonavigate. (Art.819)

1. Lack of provisionsdue tonegligenceto carryaccordingto usageandcustoms;

2. Risk of enemy not

well knownor manifest3. Defect of

vessel duetoimproperrepair; and

4. Malice,negligence, lack of foresightor skill ofcaptain.(Art. 820)

The shipowneror ship agent isliable in case ofunlawful arrivalunder stress.But they shallnot be liable forthe damagescaused byreason of alawful arrival.

(Art. 821)

It is the duty of the captain to continue thevoyage without delay after the cause of the arrivalunder stress has ceased failing in such duty rendershim liable. However, in case the cause has been riskof enemies, there must first be an assembly beforedeparture. (Art. 825)

Steps:1. Captain should determine during the

voyage if there is well founded fear ofseizure, privateers and other validgrounds;

2. Captain shall assemble the officers andsummon the persons interested in thecargo who may attend the meeting butwithout a right to vote;

3. The officers shall determine and agree if


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there is well-founded reason afterexamining the circumstances. The captainshall have the deciding vote;

4. The agreement shall be drafted and theproper minutes shall be signed and

entered in the log book;5. Objections and protests shall likewise be

entered in the minutes.

COLLISION Impact of two vessels both of which are moving.

All ision Impact between a moving vessel and a stationaryone.

Nautical Rules to Determine Negligence1. When two vesselsare about to enter a port, the farther one mustallow the nearer to enter first; if they collide,the fault is presumed to be imputable to theone who arrived later, unless it can be provedthat there was no fault on its part.2. When two vesselsmeet, the smaller should give the right of wayto the larger one.3. A vessel leavingport should leave the way clear for anotherwhich may be entering the same port.4. The vessel whichleaves later is presumed to have collided againstone which has left earlier.5. There is apresumption against the vessel which sets sailin the night.6. There is a

presumption against the vessel with spread sailswhich collides with another which is at anchorand cannot move, even when the crew of thelatter has received word to lift anchor, whenthere was not sufficient time to do so or therewas fear of a greater damage or otherlegitimate reason.7. There is apresumption against an improperly mooredvessel.8. There is apresumption against a vessel which has nobuoys to indicate the location of its anchors toprevent damage to vessels which may approachit.

9. Vessels must haveproper look-outs or persons trained as suchand who have no other duty aside therefrom.(Smith Bell v. CA)

Nauti ca l Rules as to Sai li ng Vesse l andSteamship1. Where a steamship and a sailing vessel are

approaching each other from oppositedirections, or on intersecting lines, thesteamship from the moment the sailing vessel isseen, shall watch with the highest diligence hercourse and movements so as to be able toadopt such timely means of precaution as willnecessarily prevent the two boats from comingin contact.

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

Zones of Time in the Collision of Vessels1. First zone all time up to the moment when risk

of collision begins. No rule is as yet applicable for none is necessary.

2. Second zone time between moment when risk

of collision begins and moment it becomes apractical certainty.

It is in this period where conduct of the vessels isprimordial. It is in this zone that vessels must strictlyobserve nautical rules, unless a departure therefrombecomes necessary to avoid imminent danger.

3. Third zone time when collision is certain and

time of impact.

An error in this zone would no longer be legallyconsequential.

Error in Extremis- sudden movement made by afaultless vessel during the third zone of collision with

another vessel which is at fault during the 2nd zone.Even if such sudden movement is wrong, noresponsibility will fall on said faultless vessel. (Urrutiaand Co. v. Baco River Plantation Co., 26 PHIL 632)

Cases Covered By Coll ision and All ision1. One vessel at fault

Vessel at fault is liable for damage caused toinnocent vessel as well as damages suffered by theowners of cargo of both vessels. (Art. 826)

2. Both vessels at fault

Each vessel must bear its own loss, but theshippers of both vessels may go against theshipowners who will be solidarily liable. (Art. 827)

3. Vessel at fault not known

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

Doctrine of Inscrutable Fault In case ofcollision where it cannot be determined whichbetween the two vessels was at fault, bothvessels bear their respective damage, but bothshould be solidarily liable for damage to thecargo of both vessels.

4. Third vessel at fault

The third vessel will be liable for losses anddamages. (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 amoving vessel strikes a stationary object, such as abridge post, dock, or navigational aid. (Far EasternShipping v. CA, Luzon Stevedoring vs. CA)

Even if the cause of action against the commoncarrier is based on quasi-delict, the defense of duediligence in the selection and supervision ofemployees is unavailing in case of a maritime tortresulting in collision. It is not a civil tort governed bythe Civil Code but a maritime one governed by Arts.826-839 of the Code of Commerce. (ManilaSteamship vs. Insa Abdulhaman)

Doctrine of Last Clear Chance and Rule on

Contributory Negligence cannot be applied in collision


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cases because of Art.827 of the Code of Commerce.(Notes and Cases on the Law on Transportation andPublic Utilities, Aquino, T. & Hernando, R.P. 2004ed.)

MARITIME PROTEST Condition precedent or prerequisite to recovery ofdamages arising from collisions and other maritimeaccidents.

It is a written statement made under oath by thecaptain of a vessel after the occurrence of anaccident or disaster in which the vessel or cargo islost or damaged, with respect to the circumstancesattending such occurrence, for the purpose ofrecovering losses and damages. Excuses for not filing protest: 1) where theinterested 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 vesselhas gone through a hurricane or when thecaptain believes that the cargo hassuffered damages or averages (Art. 624).

Who makes: Captain

When made: within 24 hours from the time thecollision took place.

Before whom made: competent authority at thepoint of collision or at the first port of arrival, if in thePhilippines and to the Philippine consul, if thecollision took place abroad. (Art. 835)

SHIPWRECK It is the loss of the vessel at sea as a

consequence of its grounding, or running against anobject in sea or on the coast. It occurs when thevessel sustains injuries due to a marine perilrendering her incapable of navigation. If the wreck was due to malice, negligence or lackof skill of the captain, the owner of the vessel maydemand indemnity from said captain. (Art. 841)

The rules on collision or allision, as may bepertinent, can equally apply to shipwrecks.

SPECIAL CONCEPTSARRASTRE SERVICE A contract for the unloading of goods from avessel.

Applicability: Overseas trade only. (CommercialLaw Review, C. Villanueva, 2004 ed.) Significance: When a person brings in cargofrom abroad, he cannot unload and deliver the cargoby himself. The unloading must be done by thearrastre operator, which will then deliver the cargo tothe importer. (Commercial Law Review, C.Villanueva, 2004 ed.)

Nature of business: It is a public utility,discharging functions which are heavily invested withpublic interest.

Liabil ity: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 beheld liable, the consignee must prove that thedamage was due to the negligence and while thegoods 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 pierto the holds of the vessel. (Chief of Staff vs. CIR)

As understood in the port business, the termconsists of the handling of cargo from the hold of theship to the dock, in case of pier-side unloading; or toa barge, in case of unloading at sea. (Anglo-FilTrading Corp. vs. Lazaro) The loading on the ship of outgoing cargo is alsopart of stevedoring work. (Ibid.)

CONTAINERIZATION/ SAID-TO-CONTAIN/SHIPPERS LOAD AND COUNT SYSTEM System whereby the shipper loads his cargoes in aspecially designed container, seals the container anddelivers it to the carrier for transportation. Thecarrier does not participate in the counting of themerchandise for loading into the container, the actualloading, and the sealing of the container. (US Linesv. Comm. Of Customs, ICTSI v. PrudentialGuarantee) The matter of quantity, description and conditionsof the cargo inside the container is the soleresponsibility of the shipper, unless there isstipulation to the contrary. (US Lines vs. Comm. OfCustoms, Reyma Brokerage v. Phil. Home Assurance)

Note: In order to attribute to the carrier anydamage to the shipment that may be found,

inspection of the goods should be done at pier-side.(Bankers vs. CA) III. CARRIAGE OF GOODS BY SEAACT/COGSA (C.A. No. 65)APPLICABILITY The transportation must be:

1. Water/maritimetransportation;

2. for the carriage of

goods; and3. overseas/international/foreign (from foreign port to Philippineport).

It can be applied in domestic sea transportation ifagreed upon by the parties. (Clause paramount orparamount clause)

IMPORTANT FEATURES:1. Amount of carriersliability2. Notice of damage3. Prescriptive period

AMOUNT OF CARRIERS LIABILITY Under the Sec. 4(5), the liability limit is set at$500 per package or customary freight unit unlessthe nature and value of such goods is declared bythe shipper. This is deemed incorporated in the bill

of lading even if not mentioned in it. (Eastern


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Shipping vs. IAC, 150 SCRA 463) Note that Art. 1749, NCC applies todomestic/inter-island/coastwise trade.

NOTICE OF DAMAGE (SEC. 3(6)) Rules:a. Patent damage: shipper should file a claim with

the carrier immediately upon deliveryb. 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 acondition precedent.

PRESCRIPTIVE PERIOD Action for loss or damage to the cargo should bebrought within one year after:

a. Delivery of the goods (delivered

but damaged goods); orb. The date when the goods should

have been delivered (non-delivery). (Sec.3[6])

Loss or Damage as applied to the COGSAcontemplates a situation where no delivery at all wasmade by the shipper of the goods because the samehad perished, gone out of commerce, or disappearedin such a way that their existence is unknown or theycannot be recovered. Thus, it is inapplicable in caseof misdelivery or conversion. (Ang vs. AmericanSteamship Agencies Inc.) and damage arising fromdelay or late delivery (Mitsui O.S.K. Lines Ltd. vs.CA). In such instance the, Civil Code rules onprescription shall apply.

The one-year prescriptive period is suspended by:1. The expressagreement of the parties (UniversalShipping Lines, Inc. vs. IAC, 188 SCRA170)2. The filing of an action in court until it is dismissed.(Stevens & Co. vs. Nordeutscher Lloyd, 6SCRA 180)

The one-year period shall run from delivery of thelast package and is not suspended by extrajudicialdemand. (Dole Phils.,Inc. vs. Maritime Co.,148 SCRA118)

The one-year period shall run from delivery to the

arrastre operator and not to the consignee. (UnionCarbide Phils, Inc. vs. Manila Railroad Co.,SCRA 359)

The insurer exercising its right of subrogation isbound by the one-year prescriptive period. However,it does not apply to the claim against the insurer forthe insurance proceeds. (Fil. Merchants Ins. Co. vs.Alejandro; Mayer Steel Pipe Corp. vs. CA)

IV. WARSAW CONVENTION OF 1929 (WC)PURPOSE: To protect the emerging airtransportation industry and to secure the uniformityof recovery by the passengers.APPLICABILITY The transportation must be:

1. International transportation;

2. Air transportation; and

3. Carriage of passengers, baggage or goods. The WC shall also apply to fortuitoustransportation by aircraft performed by an air

transportation enterprise.

International transportation- any transportation inwhich the place of departure and the place ofdestination are situated either:

1. Within the territories of two High ContractingParties regardless of whether or not there be abreak in the transportation or transshipment, or2. Within the territory of a single HighContracting Party, if there is an agreed stoppingplace within a territory subject to thesovereignty, mandate or authority of anotherpower, even though that power is not a party tothe Convention. (round trip, Am. Jur.)

Transportation to be performed by severalsuccessive air carriers shall be deemed to be one

undivided transportation, if it has been regarded bythe parties as a single operation, whether it has beenagreed upon under the form of a single contract or ofa series of contracts, and it shall not lose itsinternational character merely because one contractor a series of contracts is to be performed entirelywithin a territory subject to the sovereignty,suzerainty, mandate, or authority of the same HighContracting Party. (Art. 1 Sec.3)

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

are not complied with.

IMPORTANT CONCEPTS:1. Transportation documents

a. Passenger ticketb. Baggage check c. Air way bill

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

3. Successive carrier agreement4. Jurisdiction5. Combined transportation agreement

PASSENGERTICKET BAGGAGECHECK AIR WAYBILLPassenger Checked-in

baggageGoods to beshipped

LIABILITY OF CARRIER FOR DAMAGES1. Death or injury of a passenger if the accidentcausing it took place on board the aircraft or in thecourse of its operations of embarking ordisembarking; (Art. 17)2. Destruction, loss or damage to any baggage orgoods, if it took place during the transportation byair; (Art. 18) and Transportation by air The period during whichthe baggage or goods are in the charge of the

carrier, whether in an airport or on board an aircraft,


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or, in case of a landing outside an airport, in anyplace whatsoever.

It includes any transportation by land or wateroutside an airport if such takes place in theperformance of a contract for transportation by air,

for the purpose of loading, delivery, ortransshipment.3. Delay in the transportation of passengers,baggage or goods.(Art. 19)Note: The Hague Protocol amended the WC byremoving the provision that if the airline took allnecessary steps to avoid the damage, it couldexculpate itself completely (Art. 20(1)). (Alitalia vs.IAC, 192 SCRA 9)

LIMIT OF LIABILITY (Art. 22, as amended byGuatemala Protocol, 1971; Alital ia vs. IAC)1. PassengersGENERAL RULE:$100,000 per passenger

EXCEPTION:Agreement to a higher limit

2. Checked-in baggageGENERAL RULE:$20 per kilogram

EXCEPTION:In case of special declaration of valueand payment of a supplementary sum by consignor,carrier is liable to not more than the declared sumunless it proves the sum is greater than actual value.3. Hand-carried baggage $1000/passenger4. Goods to be shippedGENERAL RULE:$20 per kilogram

EXCEPTION:In case of special declaration of valueand payment of a supplementary sum by consignor,

carrier is liable to not more than the declared sumunless it proves the sum is greater than actual value.

An agreement relieving the carrier from liability orfixing a lower limit is null and void. (Art. 23) Carrier is not entitled to the foregoing limit if thedamage is caused by willful misconduct or default onits part. (Art. 25)

Thus, the WC does not operate as an exclusiveenumeration of the instances of an absolute limit ofthe extent of liability. It does not preclude theapplication of the Civil Code and other pertinent locallaws. It does not regulate or exclude liability forother breaches of contract by the carrier, or

misconduct of its employees, or for some particularor exceptional type of damage. (Alitalia vs. CA)

In PanAm v. IAC, the WC was applied as regardsthe limitation on the carriers liability, there being asimple loss of baggage without any improper conducton the part of the officials or employees of the airlineor other special injury sustained by the passenger.

In KLM Royal v. Tuller, the WC has invariably beenheld inapplicable, or as not restrictive of the carriersliability, where there was satisfactory evidence ofmalice or bad faith attributable to its officers andemployees. (Alitalia vs. IAC)

ACTION FOR DAMAGES1. Notice of claim

A written complaint must me made within:a. 3 days from receipt of baggage

b. 7 days from receipt of goodsc. In case of delay, 14 days from receipt of

baggage/goods The complaint is a condition precedent. Withoutthe complaint, the action is barred except in case offraud on the part of the carrier. (Art. 26)

2. Prescriptive period

Action must be filed within 2 years from:a. date of arrival at the destinationb. date of expected arrivalc. date on which the transportation stopped.

(Art. 29)

In United Airlines vs. Uy the two-year prescriptive

period was not applied where the airline employeddelaying tactics.

RULE IN CASE OF VARIOUS SUCCESSIVECARRIERS1. Carriage of passengers

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

EXCEPTION:Agreement or contract whereby thefirst carrier assumed liability for the whole journey.2. Carriage of baggage or goods

a. Passenger or consignor can file an action

against the firstcarrier and the carrier inwhich the damage occurred

b. Passenger or consignee can file an action

against the last carrier and the carrier inwhich the damage occurred.

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

A contract of international carriage by air,although performed by different carriers under aseries of airline tickets constitutes a single operation.Members of the International Air TransportationAssociation (IATA) are under a general poolpartnership agreement wherein they act as agent ofeach other in the issuance of tickets to contractedpassengers to boost ticket sales worldwide and at thesame time provide passengers easy access to airlineswhich are otherwise inaccessible in some parts of theworld. (American Airlines vs. CA)

Under a general pool partnership agreement, theticket-issuing airline is the principal in a contract ofcarriage while the endorsee-airline is the agent. Theobligation of the former remained and did not ceaseeven when the breach occurred not on its own flightbut on that of another airline which had undertakento carry the passengers to one of their destinations.(China Airlines vs. Chiok)

JURISDICTION At the option of the plaintiff, the action fordamages may be filed in the:

a. Court of domicile of the carrier;b. Court of its principal place of

business;


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c. Court where it has a place of business through which the contract hasbeen made; ord. Court of the place of destination.(Art. 28(1))

NOTE: It is the passengers ultimate destinationnot an agreed stopping place that determines thecountry where suit is to be filed.

The forum of action provided in Art. 28(1) is amatter of jurisdiction rather than of venue. (SantosIII vs. Northwest; 2A C.J.S.)

V. SALVAGE LAW (Act No. 2616)SALVAGE Two concepts:1. Services one person renders to the owner of aship or goods, by his own labor, preserving the goodsor the ship which the owner or those entrusted withthe care of them have either abandoned in distressat sea, or are unable to protect or secure.2. Compensation allowed to persons by whosevoluntary assistance a ship at sea or her cargo orboth have been saved in whole or in part fromimpending sea peril, or such property recovered fromactual peril or loss, as in cases of shipwreck, derelictor recapture.

Requisites:1. Valid object of salvage;2. Object must have been exposedto 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 orpartial.

Subjects of Salvage:1. Ship itself;

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