U.P.

LAW BOC TRANSPORTATION LAW COMMERCIAL LAW

TRANSPORTATION
COMMERCIAL LAW

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U.P. LAW BOC TRANSPORTATION LAW COMMERCIAL LAW

Common carriers are:

A. COMMON CARRIERS a. Persons, corporations, firms or
associations,
b. Engaged in the business of carrying or
Contract of Transportation transporting,
A contract of transportation is one whereby a c. Passengers or goods or both,
certain person or association of persons d. By land, water, or air,
obligate themselves to transport persons, e. For compensation,
things, or news from one to another for a fixed f. Offering their services to the public. [Art.
price. [Crisostomo v CA, G.R. No. 138334 1732, NCC]
(2003)]
Art. 1732 makes no distinction:
Parties to the contract: a. Between one whose principal business
a. Shipper - one who gives rise to the activity is the carrying of persons or goods
contract of transportation by agreeing to or both, and one who does such carrying
deliver the things or news to be only as an ancillary activity [Fabre v. CA,
transported, or to present his own person G.R. No. 111127 (1996)];
or those of other or others in the case of b. Between a person or enterprise offering
transportation of passengers transportation service on a regular or
b. Carrier (may sometimes be referred to scheduled basis and one offering such
as conductor) - one who binds himself to service on an occasional, episodic, or
transport persons, things, or news, as the unscheduled basis [Loadstar Shipping Co.,
case may be, or one employed in or Inc. v. CA, G.R. No. 131621 (1999)];
engaged in the business of carrying goods c. Between a carrier offering its services to
for others for hire the general public and one who offers
c. Consignee - the party to whom the carrier services or solicits business only from a
is to deliver the things being transported, or narrow segment of the general population
to whom the carrier may lawfully make [De Guzman v. CA, G.R. No. L-47822
delivery in accordance with its contract of (1988)];
carriage; the shipper and the consignee d. Between a carrier that maintains terminals
may be the same person or issues tickets with fixed and publicly
known routes and one that does not. [Asia
Carriers are persons or corporations who Lighterage and Shipping v. CA, G.R. No.
undertake to transport or convey goods, 147246 (2003)]
property, or persons, from one place to
another, gratuitously or for hire, and are Test for a Common Carrier
classified as: Whether the undertaking is a part of the activity
a. Private or special carriers, who transport or engaged in by the carrier, which it has held out
undertake to transport in a particular to the general public as its business or
instance for hire or reward [AGBAYANI, occupation.
Commercial Laws of the Philippines - Determined by the character of the
(1987)]; and business actually carried on by the carrier
b. Common or public carriers [Art. 1732, - If the undertaking is a single transaction,
NCC] not a part of the general business or
occupation engaged in, as advertised and
held out to the general public, the individual
or the entity rendering such service is a
private, not a common, carrier. [Perena v.
Nicolas, G.R. No. 157917 (2012)]

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One engaged in the business of transporting special agreement to

petroleum products from refineries via do so
pipeline is a common carrier. It is engaged in
the business of transporting or carrying goods, Diligence Required
i.e., petroleum products, for hire as a public
employment. It undertakes to carry for all Extraordinary
Ordinary diligence
persons indifferently, that is, to all persons who diligence
choose to employ its services, and transports
Governing Law
the goods by land and for compensation. The
fact that it has a limited clientele does not Civil Code; Code of
exclude it from the definition of a common Commerce and
carrier. [First Phil. Industrial v. CA, G.R. No. special laws, if not
125948 (1998)] regulated by the Civil
Code (Art. 1766); law
A customs broker may be regarded as a of the country to which Law on obligations
common carrier. As long as a person holds the goods are to be and contracts
itself to the public for the purpose of transported, if
transporting goods as a business, it is already regarding liability for
considered a common carrier regardless if it loss, destruction, or
owns the vehicle used or has to hire one. deterioration of goods
[Schmitz Transport v. CA, G.R. No. 150255 (Art. 1753)
(2005)] Regulation

A travel agency is not a common carrier. It is A public service,

not an entity engaged in the business of therefore subject to Not subject to
transporting either passengers or goods and is provisions governing regulation as a
therefore neither a private nor a common common carriers and common carrier
carrier. Its covenant with its customers is public utilities
simply to make travel arrangements on their It is not necessary that the carrier be issued a
behalf. [Crisostomo v. CA, G.R. No. 138334 certificate of public convenience. [Loadstar
(2003)] Shipping Co., Inc. v. CA, G.R. No. 131621
(1999)]
DIFFERENCE BETWEEN COMMON
CARRIER AND PRIVATE CARRIER 1. Diligence Required of
Common Carrier Private Carrier
Common Carriers
Availability
a. Standard of Diligence
Holds himself out in Agrees in some Common carriers, from the nature of their
common, that is, to all special case with business and for reasons of public policy, are
persons who choose some private bound to observe extraordinary diligence,
to employ him, as individual to carry for according to all the circumstances of each
ready to carry for hire hire case:
Binding Effect 1. In the vigilance over the goods, [Arts. 1734,
1735, and 1745, Nos. 5, 6, and 7, NCC]
Bound to carry all who Not bound to carry for and
offer and tender any reason, such 2. For the safety of the passengers
reasonable goods as it is transported by them [Art. 1733, NCC].
compensation for accustomed to carry,
carrying them unless it enters into a Extraordinary diligence
Requires carrying passengers safely:

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 As far as human care and foresight can 2. Liabilities of Common

provide,
 Using the utmost diligence of very cautious
Carriers
persons,
The obligation of the common carrier consists
 With a due regard for all the circumstances
in the transportation of passengers or goods or
[Art. 1755, NCC].
both [Art. 1732, NCC].
Note: A common carrier is not an insurer of the
safety of its passengers and is not bound Principles governing the liability of
absolutely and at all events to carry them safely common carriers:
and without injury [Yobido v. CA, G.R. No. a. The liability of a carrier is contractual and
113003 (1997)]. arises upon breach of its obligation. There
is breach if it fails to exert extraordinary
b. Presumption of Negligence diligence according to all circumstances of
each case;
The following gives rise to a presumption of b. A carrier is obliged to carry its passenger
negligence against the carrier: with the utmost diligence of a very
cautious person, having due regard for all
For carriage of goods the circumstances;
i. Proof of delivery of goods in good order c. A carrier is presumed to be at fault or to
to a carrier, and have acted negligently in case of death
of, or injury to, passengers, it being its duty
ii. Proof their arrival at the place of
to prove that it exercised extraordinary
destination in bad order
diligence; and
d. The carrier is not an insurer against all
Note: While delay in the delivery of goods is a
risks of travel [Isaac v. A.L. Ammen, G.R.
breach of contract of carriage, it does not raise
No. L-9671 (1957)].
the presumption of negligence because the
goods are not lost, deteriorated, or destroyed.
Registered owner rule
[Art. 1735, NCC].
The person who is the registered owner of a
vehicle is liable for any damage caused by the
For carriage of passengers
negligent operation of the vehicle although the
i. Death of passenger/s, or
same was already sold [Filcar Transport v.
ii. Injury to passenger/s
Espinas, G.R. No. 174156 (2012)].
Note: Mere failure to reach one’s destination,
without injury or death, does not raise the
Kabit system
presumption of negligence because it does not
It is an arrangement whereby a person who has
involve safety of the passengers.
been granted a certificate of convenience
allows another person who owns motor
Effects of Presumption
vehicles to operate under such franchise for a
 Makes out a prima facie case against the
fee [Lita Enterprises, Inc. v. IAC, G.R. No. L-
carrier
64693 (1984)].
 Makes it incumbent upon the carrier to
prove that the loss/death/injury was due to
It is invariably recognized as being contrary to
some other circumstance inconsistent with
public policy and therefore void and inexistent
its liability, or that it observed extraordinary
under Art. 1409. Thus, for the safety of
diligence [Art. 1756, NCC; Ynchausti
passengers and the public, the registered
Steamship v. Dexter and Unson, G.R. No.
owner of the vehicle is not allowed to prove that
L-15652 (1920)]. another person has become the owner so that
he may be thereby relieved of responsibility
[Lim v. CA, G.R. No. 125817 (2002)].

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One of the primary factors considered in the 1. application and approval/ denial of
granting of a certificate of public convenience franchise,
for the business of public transportation is the 2. setting of fares, routes, operating
financial capacity of the holder of the license, conditions, and
so that liabilities arising from accidents may be 3. imposition of fines, suspension and
duly compensated. The kabit system renders cancellation of franchise.
illusory such purpose and, worse, may still be
availed of by the grantee to escape civil liability The LTFRB shall grant the TNCs and their
caused by a negligent use of a vehicle owned accredited TNVS a Certificate of Public
by another and operated under his license Convenience (CPC) upon full compliance of
[Dizon v. Octavio (1955)]. jurisdictional requirements, as may be
determined by LTFRB. The LTFRB shall also
However, one who has availed of the kabit set the fare for the TNVS after public hearing
system is not precluded from filing for damages or in consultation with the TNCs and TNVS.
against another who caused the injury, as the [DOTr D.O. No. 2018-012]
policy against the kabit system will not be Previously, the TNC may or may not have been
defeated by giving such person standing to sue granted a Certificate of Public Convenience
[Lim v. CA, G.R. No. 125817 (2002)]. (CPC).
 If it is a holder of a valid and current CPC,
3. Classification of transport it is known as a common carrier.
 Otherwise, it is classified as a land
network vehicle services and transportation service contractor.
transport network companies
The Partners (owners of the vehicles used in
Transport Network Company or TNC is transporting passengers) forming part of the
defined as an organization whether a network of a TNC, may or may not be a
corporation, partnership, or sole proprietor, that common carrier, depending on whether the
provides pre-arranged transportation services Partner(s) itself/themselves are holders of a
for compensation using an internet-based CPC.
technology application or a digital platform  A mere Accreditation given by Land
technology to connect passengers with drivers Transportation Franchising and Regulatory
using their personal vehicles [DOTC D.O. No. Board (LTFRB) is not an equivalent to a
2015-011]. CPC and will not make said holder a
common carrier.
Transport Network Vehicle Service or TNVS  If the Partner is a holder of a CPC, said
refers to a TNC-accredited private vehicle Partner is a common carrier. However, if
owner, which is a common carrier, using the the Partner is not a holder of a CPC, said
internet-based technology application or digital Partner is merely a land transportation
platform technology transporting passengers service contractor [BIR RMC 70-2015]
from one point to another, for compensation.
The TNVS cannot operate as a common carrier
outside of or independent from the use of the B. VIGILANCE OVER
internet-based technology of the TNC or TNCs GOODS
to which they are accredited. [DOTr D.O. No.
2018-012]
The liability of the common carrier with respect
to vigilance over goods, in general, are as
TNVs and TNCs are expressly considered
follows:
common carriers and are classified as public a. Common carriers are responsible for the
utilities. They are subject to full regulation and loss, destruction, or deterioration of the
supervision by the LTFRB, including but not goods [Art. 1734, NCC]. In fact, they are
limited to:

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liable even in those cases where the cause 2. The common carrier must exercise due
of the loss or damage is unknown diligence to prevent or minimize the loss
[AGBAYANI]. before, during and after the occurrence of
b. If the goods are lost, destroyed, or the flood, storm, or natural disaster [Art.
deteriorated, common carriers are 1739, NCC]; and
presumed to have been at fault or to have 3. The common carrier must not have
acted negligently [Art. 1735, NCC]. negligently incurred delay [Art. 1740,
NCC].
Note: Two-pronged analysis in determining
liability: Fire may not be considered a natural disaster
a. Whether or not the cause of the loss, or calamity because it arises almost invariably
destruction, or deterioration is included from some act of man or by human means. It
under Art. 1734; does not fall within the category of an act of
b. If not, whether or not the common carrier God unless caused by lightning or by other
exercised extraordinary diligence. natural disaster or calamity [Eastern Shipping
Lines v. IAC, G.R. No. L-69044 (1987)].
Presumption of Negligence
General rule: Common carriers are Act of public enemy
responsible for the loss, destruction, or
deterioration of the goods. Requisites
a. The act of the public enemy was committed
Exception: Common carriers are not liable either in an international or civil war [Art.
when such loss, destruction, or deterioration is 1734 (2), NCC];
due to any of the following causes only: b. The act of the public enemy must have
1. Flood, storm, earthquake, lightning, or been the proximate and only cause; and
other natural disaster or calamity; c. The common carrier must exercise due
2. Act of the public enemy in war, whether diligence to prevent or minimize the loss
international or civil; before, during and after the act of the public
3. Act of omission of the shipper or owner of enemy causing the loss, destruction or
the goods; deterioration of the goods [Art. 1739, NCC].
4. The character of the goods or defects in the
packing or in the containers; Thieves, rioters, robbers, and insurrectionists,
though at war with social order, are not in a
5. Order or act of competent public authority
legal sense classed as public enemies, but are
[Art. 1734, NCC].
merely private depredators for whose acts a
carrier is answerable. Pirates on the high seas,
In all other cases of loss, destruction, or
however, stand as an exception to this rule.
deterioration, the common carrier is presumed
They are considered the enemies of all civilized
to have been at fault or to have acted
nations, and indeed of the human race, and
negligently, unless they prove that they
consequently their depredations on a common
observed extraordinary diligence [Art. 1735,
carrier will excuse him from liability [Aquino].
NCC].
Act or omission of shipper or owner
1. Exempting Causes
The act or omission of the shipper must have
Natural disaster or calamity been the proximate and only cause of the loss,
destruction, or deterioration of the goods.
Requisites
1. The natural disaster must have been the If the shipper or owner merely contributed to
proximate and only cause of the loss; the loss, destruction or deterioration of the
goods, the proximate cause being the

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negligence of the common carrier, the latter A fortuitous event has the following
shall be liable for the damages, which shall, characteristics:
however, be equitably reduced [Art. 1741, a. The cause of the unforeseen and
NCC]. unexpected occurrence, or the failure of
the debtor to comply with his obligations,
Character of the goods must be independent of human will;
b. It must be impossible to foresee the event
Requisites which constitutes the caso fortuito, or if it
a. The loss, destruction, or deterioration of can be foreseen, it must be impossible to
the goods is due to the character of the avoid;
goods or defects in the packing or in the c. The occurrence must be such as to render
containers [Art. 1734 (4), NCC]; and it impossible for the debtor to fulfill his
b. The common carrier must exercise due obligation in a normal manner; and
diligence to forestall or lessen the loss [Art. d. The obligor must be free from any
1742, NCC]. participation in the aggravation of the injury
resulting to the creditor.
If the fact of improper packing is known to the
carrier or its servants or apparent upon A common carrier may not be absolved from
ordinary observation, but it accepts the goods liability in case of force majeure or fortuitous
notwithstanding such condition, it is not event alone. The common carrier must still
relieved of liability for loss or injury resulting prove:
therefrom [Southern Lines v. CA, G.R. No. L- (i) That it was not negligent in causing the
16629 (1962)]. death or injury resulting from an
accident; [Yobido v. CA, G.R. No.
Order of competent authority 113003 (1997)]
(ii) That the loss or destruction of the
Requisites merchandise was due to accident and
a. There must be an order or act of competent force majeure and not fraud, fault, or
public authority through which the goods negligence on the part of the captain or
are seized or destroyed [Art. 1734 (5), owner of the ship [Tan Chiong Sian v.
NCC]; and Inchausti, G.R. No. L-6092 (1912)].
b. The said public authority must have had
the power to issue the order [Art. 1743, a. Requirement of Absence of
NCC]. Negligence
To be exempted from liability, the intervention If the common carrier is found to have acted
of the competent public authority must be of a negligently, it is precluded from invoking the
character that would render impossible the exempting causes under Art. 1734, and will be
fulfillment by the carrier of the obligation liable for damages suffered by the goods it
[Ganzon v. CA, G.R. No. L-48757 (1988)]. carried if such damages arise from its
negligence [Agbayani].
Force majeure
The exempting circumstance should be the
Force majeure – in general, has also been proximate and only cause of the loss,
invoked as an exempting cause based on Art. destruction, or deterioration of the goods for
1174, which states that no person shall be the common carrier to be exempted from
responsible for a fortuitous event which could liability on any of the ff. grounds:
not be foreseen, or which, though foreseen, 1. Natural Disaster/Calamity
was inevitable. 2. Act of Public Enemy
3. Character of the Goods [Art. 1739, 1742,
NCC]

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Maritima v. Insurance Co., G.R. No. L-

When the common carrier’s negligence is the 18965 (1964)], until the same are
proximate cause of the loss, destruction, or delivered actually and constructively by the
deterioration of the goods, the act or omission carrier to the consignee or to the person
of the shipper will only mitigate the carrier’s who has a right to receive them;
liability [Art. 1741, NCC]. b. When goods are temporarily unloaded or
stored in transit, unless the shipper or
b. Absence of Delay owner has made use of the right of
stoppage in transitu [Art 1737, NCC];
In order to be free from responsibility on the c. During storage in a warehouse of the
ground of natural disaster/calamity, the carrier at the place of destination, until
common carrier should not have negligently consignee has been advised of the arrival
incurred in delay [Art. 1740, NCC]. of the goods and has had reasonable
opportunity to remove or dispose them [Art
c. Due Diligence to prevent or lessen 1738, NCC].
the loss
In dealing with the contract of common carriage
of passengers, for purpose of accuracy, there
The common carrier should have exercised
are two (2) aspects of the same, namely:
due diligence to prevent, forestall or lessen the
(a) Contract ‘to carry (at some future time),’
loss, destruction, or deterioration of the goods,
in order to be exempted from liability on any of which contract is consensual and is
the ff. grounds: necessarily perfected by mere consent;
a. Natural Disaster/Calamity and
b. Act of Public Enemy (b) Contract ‘of carriage’ or ‘of common
c. Character of the Goods [Art. 1739, carriage,’ which should be considered as a
real contract for not until the carrier is
1742, NCC]
actually used can the carrier be said to
Meeting a typhoon head-on falls short of due
have already assumed the obligation of a
diligence required from a common carrier [Asia
carrier [Paras, Civil Code Annotated, 11th
Lighterage and Shipping Inc. v CA, G.R. No.
Ed].
147246 (2000)].
Note: The distinction is important in
2. Contributory Negligence determining when the common carrier is
required to exercise extraordinary
The liability of the common carrier shall be responsibility. The birth of the contract is not
equitably reduced when the loss, destruction, necessarily the birth of the duty to exercise
or deterioration of the goods when: extraordinary responsibility.
a. The negligence of the common carrier was
the proximate cause thereof; and Delivery of Goods to Common
b. The shipper or owner merely contributed to
Carriers
such loss, destruction, or deterioration [Art.
1741, NCC].
Delivery means unconditionally placing the
goods in the possession of the carrier and the
3. Duration of Liability carrier receiving them for transportation [Art.
1736].
Instances when carrier has responsibility to
exercise extraordinary diligence: Unconditionally placing the goods in the
a. From the time the goods are possession of the carrier means the shipper
unconditionally placed in the possession cannot get them back from the common carrier
of, and received by the carrier [Art 1736, at will.
NCC] or its authorized agent [Compania

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Thus, the liability of the carrier as common It is settled in maritime law jurisprudence that
carrier and its duty of extraordinary diligence cargoes while being unloaded generally remain
begins with the actual delivery of the goods, under the custody of the carrier [Asian
NOT: Terminals, Inc. v. Philam Insurance Co., G.R.
 When the common carrier received the No. 181163 (2013)].
goods not for transportation but only for
safekeeping; or Temporary Unloading or Storage
 When a receipt or bill of lading is executed,
since the issuance of a bill of lading is not General rule: Extraordinary diligence over the
necessary to complete delivery and goods remains even when the goods are
acceptance [Compania Maritima v temporarily unloaded or stored in transit.
Insurance Co., G.R. No. L-18965 (1964)].
Exception: The duty to observe such diligence
Actual or Constructive Delivery ceases when shipper or owner makes use of
the right of stoppage in transitu [Art 1737,
The extraordinary responsibility of the common NCC].
carrier ends when, subject to Art. 1738, the
goods are delivered actually or constructively Stoppage in transitu is the act by which the
by the carrier to: unpaid vendor of goods stops their progress
a. The consignee; or and resumes possession of them
b. The person who has a right to receive constructively, while they are in the course of
them, such as agents, brokers, and the transit from him to the purchaser and not yet
like. actually delivered to the latter [Agbayani].

Art. 1738 provides that the extraordinary Basis: Under Art. 1530, when the buyer of the
liability of the common carrier continues to be goods becomes insolvent, the unpaid seller
operative even during the time the goods are who has parted with the possession of the
stored in a warehouse of the carrier at the place goods, at any time while they are in transit, may
of destination, until the consignee has: resume the possession of the goods as he
1. Been advised of the arrival of the goods; would have had if he had never parted with the
and possession.
2. Had reasonable opportunity thereafter to When the right of stoppage in transitu is
remove them or otherwise dispose of them. exercised, the common carrier holds the goods
in the capacity of an ordinary bailee or
Delivery of the cargo to the customs authorities warehouseman upon the theory that the
is not delivery to the consignee or “to the exercise of the right of stoppage in transitu
person who has a right to receive them” as terminates the contract of carriage. Hence,
contemplated in Art. 1736 because in such only ordinary diligence is required
case the goods are still in the hands of the [Agbayani].
government and the owner cannot exercise
dominion over them. However, the parties may 4. Stipulation for Limitation of
agree to limit the liability of the carrier
considering that the goods still have to go Liability
through the inspection of the customs
authorities before they are actually turned over There are two possible stipulations limiting the
to the consignee. It is unfair that the carrier be liability of the common carrier:
made responsible for what may happen during a. Stipulation limiting the common carrier’s
the interregnum [Lu Do v. Binamira, G.R. No. liability as to the diligence required;
L-9840 (1957)]. b. Stipulation limiting the common carrier’s
liability as to the amount of liability.

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An agreement limiting the common carrier’s 8. That the common carrier is exempt from
liability for delay on account of strikes or riots is any and all liability for loss or damage
also valid [Art. 1748, NCC]. occasioned by its own negligence;
9. Stipulation providing for an unqualified
As to Diligence Required limitation of such liability to an agreed
A stipulation between the common carrier and stipulation [Heacock v. Macondray, G.R.
the shipper or owner limiting the liability of the No. L-16598 (1921)].
former for the loss, destruction, or deterioration
of the goods to a degree less than b. Limitation of Liability to Fixed
extraordinary diligence shall be valid, provided Amount
it be:
1. In writing, signed by the shipper or A contract fixing the sum that may be
owner; recovered by the owner or shipper for the loss,
2. Supported by a valuable consideration destruction or deterioration of the goods is
other than the service rendered by the valid if:
common carrier; and 1. It is reasonable and just under the
3. Reasonable, just and not contrary to circumstances; and
public policy [Art. 1744, NCC]. 2. It has been fairly and freely agreed upon
[Art. 1750, NCC].
a. Void Stipulations
While a passenger may not have signed the
Any of the following or similar stipulations shall plane ticket, he is nevertheless bound by the
be considered unreasonable, unjust and provision thereof, regardless of the latter’s lack
contrary to public policy: of knowledge or assent to the regulation. It is
what is known as a contract of adhesion
1. That the goods are transported at the risk wherein one party imposes a ready-made form
of the owner or shipper; of contract on the other. The one who adheres
2. That the common carrier will not be liable to the contract is in reality free to reject it
for any loss, destruction, or deterioration of entirely. A contract limiting liability upon an
the goods; agreed valuation does not offend against the
3. That the common carrier need not observe policy of the law forbidding one from
any diligence in the custody of the goods; contracting against his own negligence [Ong
4. That the common carrier shall exercise a Yiu v. CA, G.R. No. l-40597 (1979)].
degree of diligence less than that of a good
father of a family, or of a man of ordinary [However], the fact that the conditions are
prudence in the vigilance over the printed at the back of the ticket stub in letters
movables transported; so small that they are hard to read would not
5. That the common carrier shall not be warrant the presumption that the [shipper] was
responsible for the acts or omission of his aware of those conditions such that he had
or its employees; “fairly and freely agreed” to those conditions
6. That the common carrier’s liability for acts [Shewaram v. PAL, G.R. No. L-20099 (1966)].
committed by thieves, or of robbers who do
not act with grave or irresistible threat, Factors Affecting Agreement
violence or force, is dispensed with or The effect of these stipulations is subject to the
diminished; following provisions:
7. That the common carrier is not responsible 1. An agreement limiting the common
for the loss, destruction, or deterioration of carrier’s liability may be annulled by the
goods on account of the defective condition shipper or owner if the common carrier
of the car, vehicle, ship, airplane or other refused to carry the goods unless the
equipment used in the contract of carriage former agreed to such stipulation [Art.
[Art. 1745, NCC]; 1746, NCC];

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2. If the common carrier, without just cause, must have a direct relationship with the
delays the transportation of the goods or passenger who is traveling.
changes the stipulated or usual route, the
contract limiting the common carrier’s For instance, a balikbayan box or suitcase is
liability cannot be availed of in case of the passenger’s baggage. However, 10,000 cans
loss, destruction, or deterioration of the of corned beef is not considered as passenger
goods [Art. 1747, NCC]; baggage. They are considered as goods, and
3. The fact that the common carrier has no are not part of the contract of carriage [of
competitor along the line or route, or a part passenger]. A separate contract of carriage [or
thereof, to which the contract refers shall bill of lading] must be entered into in order to
be taken into consideration on the question transport them [Agbayani].
of whether or not a stipulation limiting the
common carrier’s liability is reasonable, There are two kinds of passenger’s baggage,
just and in consonance with public policy which are governed differently:
[Art. 1751, NCC]; a. Passenger baggage in the custody of the
4. Even when there is an agreement limiting passenger (or carry-on luggage); and
the liability of the common carrier in the b. Passenger baggage NOT in the custody
vigilance over the goods, the common of the passenger (or checked-in luggage).
carrier is disputably presumed to have
been negligent in case of their loss, The liability is greater for baggage that is in the
destruction or deterioration [Art. 1752, custody of the carrier, or checked-in baggage,
NCC]. as compared to those in the possession of the
passenger.
c. Limitation of Liability in
Absence of Declaration of a. Checked-In baggage
Greater Value
The provisions of Arts. 1733-1753 shall apply
A stipulation that the common carrier’s liability to passenger’s baggage which is not in his
is limited to the value of the goods appearing in personal custody or in that of his employee [Art.
the bill of lading, unless the shipper or owner 1754, NCC].
declares a greater value, is binding [Art. 1749,
NCC]. In other words, the rules governing the
responsibility of a common carrier in the
Where the liability has been limited due to a transportation of goods apply. Thus,
stipulation written at the back of a ticket, to the extraordinary diligence is required.
effect that the liability is limited to a certain
amount unless the passenger declares a b. Baggage in Possession of
higher valuation, a passenger who did not
Passengers
declare a higher valuation, or did not pay
additional charges, cannot increase the liability
As to baggage other than checked-in baggage,
of the carrier [Ong Yiu v. CA, G.R. No. l-40597
they are governed by Arts. 1998, and 2000-
(1979)].
2003, concerning the responsibility of hotel-
keepers [Art. 1754, NCC].
5. Liability for Baggage of
Passengers Art. 1998, as applied by analogy, the baggage
of passengers in their personal custody or in
Baggage are things that a passenger will bring that of their employees, while being
with him consistent with a temporary absence transported, are regarded as necessary
from where he lives. Passenger’s baggage deposits. The common carriers are responsible
as depositaries, provided that:

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1. Notice was given to them, or to their

employees, of the effects brought by the C. SAFETY OF
passengers; and PASSENGERS
2. The passengers take the precautions
which the common carrier advised relative The liability of the common carrier with respect
to the care and vigilance of their baggage.
to the safety of passengers, in general, are as
follows:
In case of loss or injury to the baggage of
(1) A common carrier is bound to carry the
passengers in their personal custody, or in that
passengers safely as far as human care
of their employees, while being transported,
and foresight can provide, using the utmost
the carrier is liable if the loss or injury is caused
diligence of very cautious persons, with a
by:
due regard for all the circumstances [Art.
1. His servants;
1755, NCC];
2. His employees;
(2) In case of death of or injuries to
3. Strangers [Art. 2000, NCC]; or
passengers, common carriers are
4. A thief or robber done without the use of
presumed to have been at fault or to have
arms or irresistible force [Art. 2001, NCC].
acted negligently, unless they prove that
they observed extraordinary diligence [Art.
The carrier is not liable if loss or injury is
1756, NCC].
caused by:
1. Force majeure [Art 2000, NCC];
Note: It is not enough that the accident was
2. Theft or robbery with the use of arms or
caused by force majeure, the common carrier
irresistible force [Art 2001, NCC];
must still prove that it was not negligent in
3. The acts of the passenger, his family, causing the injuries resulting from such
servants, or visitors; accident [Bachelor Express v. CA, G.R. No.
4. The character of the baggage [Art 2002, 85691 (1990)]. Bachelor Express illustrates
NCC]. that force majeure is not itself a defense; the
exercise of the diligence required by law is the
The following provisions also figure in defense.
determining the liability of the common carrier:
1. The fact that passengers are constrained 1. Void Stipulations
to rely on the vigilance of the common
carrier shall be considered in determining General rule: The responsibility of a common
the degree of care required of him [Art carrier for the safety of passengers cannot be
2000, NCC]; dispensed with or lessened by stipulation by
2. The common carrier cannot free himself the posting of notices, by statements on tickets,
from responsibility by posting notices to the or otherwise [Art. 1757, NCC].
effect that he is not liable for the articles
brought by the passenger; Exception: When a passenger is carried
3. Any stipulation whereby the responsibility gratuitously, a stipulation limiting the common
of the common carrier as set forth in Arts. carrier’s liability for negligence is valid [Art
1998-2001 is suppressed or diminished 1758, NCC].
shall be void [Art. 2003, NCC].
Exception to the exception: Even when a
passenger is carried gratuitously, a stipulation
limiting the common carrier’s liability for willful
acts or gross negligence is invalid [Art 1758,
NCC].

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The reduction of fare does not justify any (1) Caused by the (a) He may not be
limitation of the common carrier’s liability [Art. disability of the required to pay
1758, NCC]. vessel and any increased
(2) A passenger price of passage;
2. Duration of Liability should agree to but
await the repairs (b) His living
As in the contract of carriage of goods, the expenses during
perfection of the contract of carriage of the stay shall be
passengers does not necessarily coincide with for his own
the commencement of the duty of extraordinary account.
diligence. It may occur at the same time or
later. 2. In case of delay in the departure of the
vessel, the passengers have:
Based on jurisprudence, the duty that the a) The right to remain on board;
carrier of passengers owes to its patrons b) If the delay is not due to a fortuitous
extends to persons boarding the cars as well event or force majeure, the right to be
as those alighting therefrom [Del Prado v.
furnished with food for the account of
Manila Electric Company, G.R. No. L-29462
the vessel;
(1929)].
c) If the delay should exceed ten days:
i) Passengers requesting the same
This is also reflected in Art. 17, Warsaw shall be entitled to the return of the
Convention, which applies to international air fare; and
carriage. It provides that the liability of a
ii) If it is due exclusively to the fault
common carrier for injury to the passenger
of the captain or ship agent, they
lasts from embarkation to disembarkation,
may also demand indemnity for
including the period when the passenger is on
losses and damages.
board the aircraft.
A vessel exclusively devoted to the
In maritime commerce, Art. 698, Code of transportation of passengers must take them
Commerce relates to the period of the voyage: directly to the port or ports of destination, no
1. In case a voyage already begun should be matter what the number of passengers may be,
interrupted: making all the stops indicated in its itinerary.
a. The passengers shall be obliged to
pay the fare in proportion to the
distance covered; and
a. Waiting for Carrier or Boarding of
b. Have the following reliefs: Carrier

The duty that the carrier of passengers owes to

Cause of Relief its patrons extends to persons boarding the
interruption cars as well as to those alighting therefrom.
An accidental cause Without right to
or force majeure recover for losses It is the duty of common carriers of passengers
and damages to stop their conveyances at a reasonable
length of time in order to afford passengers an
By the captain With a right to opportunity to board and enter:
exclusively indemnity 1. Carriers 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 Transportation v. CA, G.R. No.
95582 (1991)].

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2. However, a person boarding a moving car justify the presence of the victim on or near
must be taken to assume the risk of injury the petitioner’s vessel:
from boarding the car under the conditions 1. A person who, after alighting from a train,
open to his view. Nonetheless, he cannot walks along the station platform is
fairly be held to assume the risk that the considered still a passenger;
motorman, having the situation in view, will 2. A passenger, who has alighted at his
increase the peril by accelerating the destination and is proceeding by the usual
speed of the car before he is planted safely way to leave the company’s premises, but
on the platform [Del Prado v. Manila before actually doing so is halted by the
Electric Company, G.R. No. L-29462 report that his brother, a fellow passenger,
(1929)]. has been shot, and he in good faith, returns
to relieve his brother, is deemed
The extraordinary responsibility of common reasonably and necessarily delayed and
carriers commences: thus continues to be a passenger entitled
(i) With respect to carriage of passengers as such to the protection of the railroad and
by trains: The moment the person who company and its agents [La Mallorca v. CA,
purchases the ticket from the carrier G.R. No. L-20761 (1966)];
presents himself at the proper place 3. In the case of a shipper, the passengers of
and in a proper manner to be vessels are allotted a longer period of time
transported with a bona fide intent to to disembark from the ship than other
ride the coach [Aquino citing Vda. de common carriers such as a passenger bus,
Nueca, et al. vs. Manila Railroad since such vessels are capable of
Company]. accommodating a bigger volume of both
(ii) With respect to carriage of passengers passenger and baggage as compared to
by sea: As soon as the person with the capacity of a regular commuter bus.
bona fide intention of taking passage Consequently, a ship passenger will need
places himself in the care of the carrier at least an hour as is the usual practice, to
or its employees and is accepted as disembark from the vessel and claim his
passenger [Aquino]. baggage [Aboitiz Shipping v. CA, G.R. No.
84458 (1989)];
b. Arrival at Destination 4. The carrier necessarily would still have to
exercise extraordinary diligence in
The relation of carrier and passenger does not safeguarding the comfort, convenience
cease at the moment the passenger alights and safety of its stranded passengers until
from the carrier’s vehicle at a place selected by they have reached their final
the carrier at the point of destination, but destination [PAL v. CA, G.R. No. L-82619
continues until the passenger has had a (1993)].
reasonable time or a reasonable opportunity to
leave the carrier’s premises. Note: Despite the Court’s pronouncement in
PAL v. CA, note that common carriers are
What is a reasonable time or a reasonable bound to observe extraordinary diligence in the
delay within this rule is to be determined from ‘safety’ of its passengers. The law does not
all the circumstances such as the kind of mention the words ‘comfort’ and ‘convenience.’
common carrier, the nature of its business, the
customs of the place, and so forth, and 3. Liability for Acts of Others
therefore precludes a consideration of the time
element per se without taking into account Employees
such other factors.
General rule: Common carriers are liable for
The primary factor to be considered is the the death of or injuries to passengers through
existence of a reasonable cause as will

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the negligence or willful acts of the former’s as there are human factors involved in the
employees, although such employees may situation [Yobido v. CA, G.R. No. 113003
>have acted beyond the scope of their (1997)].
authority or in violation of the orders of the
common carriers. Other Passengers and Strangers
This liability does not cease: General Rule: A common carrier is not liable
(i) Even upon proof that they exercised for injuries inflicted by strangers or co-
all the diligence of a good father of a passengers.
family in the selection and
supervision of their employees [Art. Exception: A common carrier is responsible
1759, NCC]; for injuries suffered by a passenger on account
(ii) By stipulation, by the posting of of the willful acts or negligence of other
notices, nor by statements on the passengers or of strangers, if the common
tickets eliminating or limiting said carrier's employees, through the exercise of
liability [Art. 1760, NCC]. the diligence of a good father of a family,
could have prevented or stopped the act or
Ratio: The servant is clothed with delegated omission [Art. 1763, NCC].
authority and charged with the duty to execute
the carrier’s undertaking to carry the passenger Note: The law speaks of injuries suffered by the
safely [Agbayani]. Also, the defense of passenger but not death. However, there
diligence in the selection and supervision of appears to be no reason why the common
employees does not obtain because the liability carrier should not be held liable under such
is not based on quasi-delict, but on culpa circumstances. The word “injuries” should be
contractual. However, there must be a interpreted to include death [Agbayani].
reasonable connection between the act and
the contract of carriage. Under Art. 1763, a tort committed by a stranger
which causes injury to a passenger does not
Note: The employee must be on duty at the accord the latter a cause of action against the
time of the act. carrier. The negligence for which a common
It is enough that the assault happens within carrier is held responsible is the negligent
the course of the employee’s duty. It is no omission by the carrier’s employees to prevent
defense for the carrier that the act was done in the tort from being committed when the same
excess of authority or in disobedience of the could have been foreseen and prevented by
carrier’s orders. [Maranan v. Perez, G.R. No. them through the exercise of the diligence of
L-22272 (1967)]. a good father of a family [Pilapil v. CA, G.R.
No. 52159 (1989)].
Exception: A common carrier is not
responsible for acts falling under force Contributory Negligence
majeure. When a party is unable to fulfill his The passenger must observe the diligence of a
obligation because of force majeure, he cannot good father of a family to avoid injury to himself
be held liable for damages for non- [Art. 1761, NCC].
performance [Japan Airlines vs. CA, G.R. No.
118664 (1998)]. The contributory negligence of the passenger
does not bar recovery of damages for his death
Note: In order to be exempted from liability due or injuries, if the proximate cause thereof is the
to a fortuitous event, a common carrier must negligence of the common carrier, but the
still prove a complete exclusion of human amount of damages shall be equitably reduced
agency from the cause of injury or death. [Art. 1762, NCC].
Hence, it was held that the explosion of the new
tire may not be considered a fortuitous event

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However, when the negligence of the

passenger was the proximate cause of the c. Right to amenities
injury, the passenger is barred from recovery, The operator shall provide, free of charge, the
and the common carrier is exempted from passengers with the following:
liability. i. Snacks or refreshment, or meals
during mealtime;
It is negligence per se to voluntarily or ii. Free access to first aid/ relief medicine,
inadvertently protrude one’s arm, hand, elbow, if necessary;
or any other part of his body through the iii. Free access to communication facilities
window of a moving car beyond the outer edge or services, if necessary;
of the window or outer surface of the car, so as iv. Free, decent, and clean
to come in contact with objects or obstacles accommodation located near or
near the track [Isaac v. A.L. Ammen, G.R. No. accessible from the port;
L-9671 (1957)]. v. Free transportation to and from the port
and the place of accommodation,
4. Liability for Delay in should the delay require a waiting time
of more than eight (8) but not
Commencement of Voyage exceeding twenty-four (24) hours
[Maritime Industry Authority Circular
A “delayed voyage” refers to a voyage No. 2018-27].
involving:
i. Late departure of the ship from its port d. Right to compensation
of origin; or As an alternative to providing accommodation
ii. Late arrival thereof to its port of or whenever the same is not practicable, the
destination for a period of time not operator may offer the passengers
exceeding twenty-four (24) hours from corresponding compensation:
the CPC-authorized time of departure i. In an amount equivalent to the
or arrival of the ship [Maritime Industry prevailing market price of a decent and
Authority Circular No. 2018-27]. clean accommodation in the immediate
or adjacent locality of the ship’s point of
In case of delayed voyages, passengers shall departure;
have the following rights: ii. Subject to the limitation of a maximum
of three (3) nights per passenger
a. Right to information [Maritime Industry Authority Circular
Within thirty (30) minutes of knowledge that the No. 2018-27].
voyage shall be delayed but not later than one
(1) hour before the CPC-authorized departure e. Right to remain on board
schedule, the operator shall inform the In case the departure of the vessel is delayed
passengers of: the passengers have a right to remain on board
i. The delay; and to be furnished with food for the account of
ii. The cause of delay; the vessel, unless the delay is due to an
iii. The new departure or expected arrival accidental cause or to force majeure [Art. 698,
time [Maritime Industry Authority COC].
Circular No. 2018-27].
f. Right to return
b. Right to refund or revalidation If the delay should exceed ten days, the
Should the delay be for more than three (3) passengers who request it shall be entitled to
hours, the passenger shall be offered the the return of the passage [Art. 698, COC].
option to request a refund of the ticket price, or
for the revalidation of the ticket [Maritime
Industry Authority Circular No. 2018-27].

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g. Right to damages a. Actual or Compensatory Damages

If the delay were due exclusively to the captain Actual or compensatory damages refer to
or agent, the passengers may furthermore adequate compensation for such pecuniary
demand indemnity for losses and damages loss suffered as duly proved [Art. 2199, NCC].
[Art. 698, COC].
Under Art. 2201, the liability for damages
5. Liability for Defects in include:
a. In case the common carrier acted in good
Equipment and Facilities faith:
a. The natural and probable
While a carrier is not an insurer of the safety of consequence of the breach of the
the passengers, it should nevertheless be held obligation; and
to answer for the flaws of its equipment and b. Those which the parties have
mechanical defects, if such flaws were at all foreseen or could have reasonably
discoverable. foreseen at the time the obligation
was constituted;
The manufacturer of the defective appliance is b. In case of fraud, bad faith, malice or wanton
considered in law, as the agent of the carrier, attitude, all damages which may be
and the good repute of the manufacturer will reasonably attributed to the non-
NOT relieve the carrier from liability. performance of the obligation.
Rationale: The passenger has no privity with
the manufacturer of the defective equipment. In case of death, actual damages also include:
Hence, he has no remedy against him, while a. Loss of earning capacity, unless the
the carrier usually has [Necesito vs. Paras, deceased had no earning capacity at the
G.R. No. L-10605 (1958)]. time of death; and
b. Support for a period not exceeding five
6. Extent of Liability for years [Art. 2206, NCC].
Damages
In the absence of a showing that common
Damages recoverable from common carriers, carrier’s attention was called to the special
both in cases of carriage of passengers and circumstances requiring prompt delivery of a
goods, shall be awarded in accordance with passenger’s luggage, the common carrier
Title XVIII concerning Damages. cannot be held liable for the cancellation of
passenger’s contracts [for exhibition of films]
Art. 2206, on liability, in case of death, for loss as it could not have foreseen such an
of earning capacity, support, and moral eventuality when it accepted the luggage for
damages for mental anguish, shall also apply transit [Pan-Am World Airways v. IAC, G.R. No.
to the death of a passenger caused by the 70462 (1988)].
breach of contract by a common carrier [Art.
1764, NCC]. b. Moral Damages
Moral damages, though incapable of pecuniary
Thus, the damages recoverable are: computation, if they are the proximate result of
a. Actual or compensatory damages; the common carrier’s wrongful act or omission,
b. Moral damages; may be recovered [Art. 2217, NCC].
c. Exemplary damages;
d. Nominal, temperate, and liquidated In cases of breach of contract of carriage,
damages; moral damages may be recovered where:
e. Attorney’s fees. 1. The common carrier acted fraudulently;
2. The common carrier acted in bad faith [Art.
2220, NCC];

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3. Death of a passenger resulted even in the breach of contract of carriage and in every case
absence of bad faith or fraud [Art. 2206, where any property right has been invaded
NCC]. [Art. 2222, NCC].

Bad faith contemplates a state of mind A violation of the passenger’s right to be

affirmatively operating with furtive design or treated with courtesy in accordance with the
with some motive of self-interest or will or for degree of diligence required by law to be
ulterior purpose [Air France v. Carrascoso, exercised by every common carrier entitles the
G.R. No. L-21438 (1966)]. passenger to nominal damages [Saludo v. CA,
G.R. No. 95536 (1922)].
Inattention and lack of care on the part of the
carrier, resulting in the failure of the passenger Temperate or moderate damages, which are
to be accommodated in the class contracted more than nominal but less than compensatory
for, amounts to bad faith or fraud which entitles damages, may be recovered when some
the passenger to the award of moral damages pecuniary loss has been suffered but its
in accordance with Art. 2220 [Ortigas v. amount cannot, from the nature of the case, be
Lufthansa, G.R. No. L-28773 (1975)]. proved with certainty [Art. 2224, NCC].

Willful and deliberate overbooking on the part In the case of Philtranco v Paras [G.R. No.
of the airline carrier constitutes bad faith. Under 161909(2012)], the Supreme Court upheld the
Section 3, Economic Regulations No. 7 of the award of temperate damages by the CA. Paras
Civil Aeronautics Board, overbooking, which failed to show receipts of at least two surgeries
does not exceed ten percent, is not considered as well as rehabilitative therapy. Nonetheless,
as deliberate and therefore does not amount to the CA was convinced that Paras should not
bad faith [United Airlines v. CA, G.R. No. suffer from the lack of definite proof of his
124110 (2001)]. actual expenses for the surgeries and
rehabilitative therapy. Thus, the CA awarded to
c. Exemplary Damages him temperate damages of P50,000.00 in the
In a contract of carriage, exemplary damages absence of definite proof of his actual
may be awarded if the common carrier acted in expenses towards that end.
a wanton, fraudulent, reckless, oppressive, or
malevolent manner [Art. 2232, NCC]. Liquidated damages are those damages
agreed upon by the parties to a contract, to be
Exemplary damages serves as an instrument paid in case of breach thereof [Art. 2226, NCC].
to serve the ends of law and public policy by
reshaping socially deleterious behaviors, e. Attorney’s Fees
specifically, in the case, to compel the common Under Art. 2208, as applicable to a contract of
carrier to control their employees, to tame their carriage, attorney’s fees and expenses of
reckless instincts, and to force them to take litigation may be recovered in the following
adequate care of human beings and their cases:
property [Mecenas v. CA, G.R. No. 88052 1. When exemplary damages are awarded;
(1989)]. 2. When the common carrier’s act or omission
has compelled the plaintiff to litigate with
d. Nominal, Temperate, and Liquidated third persons or to incur expenses to
Damages protect his interest;
Nominal damages are adjudicated in order 3. Where the common carrier acted in gross
that a right of the plaintiff, which has been and evident bad faith in refusing to satisfy
violated by the defendant, may be vindicated or the plaintiff’s valid, just and demandable
recognized, not for the purpose of indemnifying claim;
the plaintiff for any loss suffered by him [Art.
2221, NCC]. It may be awarded in case of

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4. In any other case where the court deems it It is covered by the Parol Evidence Rule in
just and equitable that attorney’s fees and which the terms of the contract are rendered
expenses of litigation should be recovered. conclusive upon the parties.

Evidence aliunde is not admissible to vary or

D. BILL OF LADING contradict a complete and enforceable
agreement embodied therein [Magellan Mfg.
Marketing Corp. v. CA, G.R. No. 95529
Definition (1991)].
A Bill of Lading is a written acknowledgement,
signed by the master of a vessel or other The value of the goods stated in the bill of
authorized agent of the carrier, that he has lading is conclusive between the parties, and
received the described goods from the shipper: the shipper is not allowed to prove a higher
a. To be transported on the expressed terms value [Art. 372, COC].
to the described place of destination; and
b. To be delivered there to the designated It is only when the carrier’s fault is so gross as
consignee or parties [70 Am. Jur. 2d 924]. to amount to actual fraud that the actual
amount of the losses and damages suffered
Effectivity may be proved by the shipper against the
The bill of lading becomes effective usually carrier.
upon its delivery to and acceptance by the
shipper [Aquino]. Exception: The contents of the bill of lading
are not controlling when there is falsity and
In the absence of fraud, concealment, or material error in its drafting [Art. 353, COC].
improper conduct, it is presumed that the
stipulations of the bill are known to the shipper, A bill of lading is not, however, indispensable
and he is generally bound by his acceptance for the creation of a contract of carriage
whether he reads the bill or not [Magellan Mfg. [Compania Maritima v Insurance Co., G.R. No.
Marketing Corp. v. CA, G.R. No. 95529 L-18965 (1964)].
(1991)].
In the absence of a bill of lading, disputes shall
be determined by the legal proofs which the
1. Three-Fold Character parties may present in support of their
respective claims, according to the Code of
A Bill of Lading operates as a: Commerce [Art. 354, COC].
1. Receipt as to the quantity and description
of the goods shipped;
2. Contract to transport and deliver the goods 2. Delivery of Goods
to the consignee or other person therein
designated, on the terms specified in such The goods should be delivered to the
instrument; and consignee or any other person to whom the bill
3. Document of title, which makes it a symbol of lading was validly transferred or negotiated.
of the goods.
The carrier is duty bound to deliver the goods
General Rule: The bill of lading constitutes the in the same condition in which, according to the
legal evidence of the contract of transportation, bill of lading, they were at the time of their
and all disputes between the parties regarding receipt, without damage or impairment [Art.
the execution and performance of the contract 363, COC].
shall be decided by the contents of the bill of
lading issued by the carrier.

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Period of Delivery This receipt produces the same effects as the

return of the bill of lading [Art. 353, par. 3,
Period for the delivery of goods COC].
Period of Delivery must be made
delivery is within period fixed [Art. 370, If surrender of the original bill of lading is not
stipulated COC]. possible, acknowledgment of the delivery by
in the Bill of signing the delivery receipt suffices for a
Lading common carrier to be discharged of its
Period of Delivery must be made contractual obligation [National Trucking and
delivery is through the first shipment of Forwarding Corp v Lorenzo Shipping Corp,
NOT the same or similar G.R. No. 153563 (2005)].
stipulated merchandise to the point of
delivery. If not made on such Refusal of Consignee to Take
first shipment, delay arises. Delivery
[Art. 358, COC].
The consignee may refuse to take delivery in
the following cases:
Liability in case of delay in delivering the goods 1. If only part of the goods transported should
Indemnity Liability is limited to the be delivered, when he proves that he
for delay is stipulation [Art. 358, COC]. cannot make use thereof without the others
fixed in the [Art. 363, COC];
Bill of 2. When the goods are rendered useless for
Lading purposes of sale or consumption in the use
Indemnity Liable for all damages which for which they are properly destined, in
for delay may have been caused by which case the consignee may demand
NOT fixed the delay [Art. 370, COC]. payment of the goods at current market
prices [Art. 365, COC];
3. In case part of the goods is in good
Delivery Without Surrender of Bill condition and separation is possible, the
of Lading consignee may refuse to receive only the
damaged goods [Art. 365, COC];
After the contract has been complied with: 4. Where the delay is through the fault of the
a. The bill of lading which the carrier has carrier [Art. 371, COC].
issued shall be returned to him; and
b. The respective obligations and actions In case of dispute as to the condition of the
shall be considered cancelled by virtue goods, the same shall be examined by experts
of the exchange of this title with the appointed by the parties, and in case of
thing transported. disagreement, appointed by the judicial
Unless in the same act, the claim which the authority.
parties may wish to reserve be reduced to
writing. If the persons interested should not agree with
Exception being made of the provisions of Art. the report, said judicial authority shall order the
366, on period for filing claims [Art. 353, par. 2, deposits of the merchandise in a safe
COC]. warehouse, and the parties interested shall
make use of their rights in the proper manner
If the consignee CANNOT return the bill of [Art. 367, COC].
lading subscribed by the carrier, upon receiving
the merchandise, in case of loss or for any Horses, vehicles, vessels and equipment used
other reason whatsoever: The consignee shall by the carrier serve as liens for the payment of
give said carrier a receipt for the goods the value of the goods, which the carrier must
delivered.

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pay in case of loss or misplacement [Art. 372, requirement was held nevertheless to have
COC]. been complied with [Aboitiz v Insurance
Company of North America, GR No. 168402
3. Period for Filing Claims (2008)].

A claim, on account of damage found upon Code of Commerce COGSA

opening the packages, must be made against
the carrier: Primarily governs Applicable law for
a. Within 24 hours, if the indications of the domestic transport, all contracts for
damage cannot be ascertained from the but nothing stops carriage of goods
exterior of the packages (i.e., latent parties from by sea to Philippine
damage); or stipulating that ports in foreign
b. At the time of receipt, if the indications COGSA applies in trade
damage can be so ascertained (i.e., patent their contract
damage) [Art. 366, COC]. File claim for apparent loss: upon receipt
File claim within 24 File claim within 3
No claim whatsoever shall be admitted against
hours from delivery if days from delivery if
the carrier with regard to the condition in which
damage or loss is not damage or loss is
the goods transported were delivered:
apparent not apparent
a. After the periods mentioned have elapsed;
or Filing of the claim is Filing of the claim is
b. After the transportation charges have been mandatory; condition not mandatory
paid. precedent for filing of
action for damages
The periods mentioned commence upon
delivery of cargo to the consignee at the place
of destination. Prescriptive period to Prescriptive period
file an action: to file an action:
Thus, Art. 366 is limited to cases of claims for 10 years from breach 1 year from
damage to goods actually turned over by the if bill of lading/written discharge of goods,
carrier and received by the consignee. It does receipt/contract is or date when they
not apply to misdelivery of goods. issued. 6 years from should have been
breach if only through delivered. The 1-
Failure to file a claim bars recovery [Aquino]. oral contract year period may be
extended by
Ratio: The rule protects the carrier by affording stipulation.
it an opportunity to make an investigation of a
claim while the matter is still fresh and easily
investigated so as to safeguard itself from false The parties to a contract of carriage may fix, by
and fraudulent claims [UCPB General Ins. Co., agreement, a shorter time for the bringing of
Inc. v. Aboitiz Shipping, G.R. No. 168433 suit on a claim for the loss of or damage to the
(2009)]. shipment than that provided by the statute of
limitations.
However, provisions specifying a time to give i. In the absence of any statutory limitation;
notice of damage to common carriers are and
ordinarily to be given a reasonable and ii. Subject to the requirement on the
practical, rather than a strict construction. reasonableness of the stipulated period.
Thus, in light of the peculiar circumstances in Ratio: Such stipulation merely affects the
this case, the Court made a pro hac vice ruling, shipper’s remedy and does not affect the
in that even if the notice was given more than liability of the carrier [PHILAMGEN v. Sweet
24 hrs after the receipt of the goods, the notice Lines, Inc., G.R. No. 87434 (1992)].

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occasioned by
4. Period for Filing Actions its own
negligence
Overland Transportation and Limited Unqualified INVALID
liability limitation of
Coastwise Shipping such liability to
an agreed
The general rules under the Civil Code on valuation
extinctive prescription apply. Thus, action for
Qualified Limits the VALID and
damages must be filed in court:
liability liability of the enforceable
1. Within 6 years, if a bill of lading was not
carrier to an
issued [Art. 1145, NCC];
agreed
2. Within 10 years, if a bill of lading was
valuation unless
issued [Art. 1146, NCC].
the shipper
declares a
International Carriage of Goods by higher value
Sea and pays a
higher rate of
Suit must be brought within one year: freight
1. After delivery of the goods; or [H.E. Heacock Company v. Macondray &
2. From the date when the goods should have Company, Inc., G.R. No. L-16598, Oct. 3,
been delivered. 1921].

Otherwise, the carrier and the ship shall be

discharged from all liability in respect of loss or
damage. E. MARITIME COMMERCE
The absence of notice shall not affect or
prejudice the right of the shipper to bring suit Vessel
within one year after the delivery of the goods Vessels are those engaged in navigation,
or the date when the goods should have been whether coastwise or on the high seas
delivered [Section 3(6), COGSA]. destined for the services of the industry or
maritime commerce.
The COGSA, as adopted and embodied in CA
No. 65, applies because it is a special law, and, The word ‘vessel’ used in the Code of
as such, prevails over the general provisions of Commerce was not intended to include all
the Civil Code on prescription of actions ships, craft, or floating structures of every kind
[Maritime Agencies & Services, Inc. v. CA, without limitation [Lopez v. Duruelo, G.R. No.
G.R. No. 77638 (1990) ]. L-29166 (1928)].

Vessels are considered personal or movable

5. Effects of Stipulations property [Art. 585, COC]; but they partake to a
certain extent, of the nature and conditions of
Three kinds of limiting stipulations often made real property, on account of their value and
in bill of lading: importance in the world of commerce.
Effect Valid/Invalid
No Exempts the INVALID
liability carrier from any
1. Charter Parties
and all liability
for loss or Charter party – a contract by virtue of which the
damage owner or agent of a vessel binds himself to

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transport merchandise or persons for a fixed b. Existing vessel which should be placed at
price. the disposition of the shipper;
c. Freight; and
Liabilities arising from breach of a charter party d. Compliance with the formal requisites
is identical to overland transport. under Article 652 of the Code of Commerce
which include the requirement that the
Towage is not a charter party. It is a contract charter party must be in (a) writing, (b)
for the hire of services by which a vessel is drawn in duplicate, and (c) signed by the
engaged to tow another vessel from one port to parties [Aquino].
another for consideration.
In modern maritime law and usage, there are
Bill of lading distinguished from a charter party three distinguishable types of charter parties:
Bill of Lading Charter Party a. Bareboat or demise charter;
A private receipt A complete contract, b. Time charter; and
which the captain whereby the whole or c. Voyage or trip charter [Litonjua Shipping,
gives to accredit part of the ship is let Inc. v. National Seamen Board, G.R. No. L-
that such goods by the owner to a 51910 (1989)].
belong to such merchant or other
persons. person for a specified Note: Both time and voyage charters are said
time or use for the to be contracts of affreightment, where a
conveyance of goods, common or public carrier is not converted into
in consideration of the a private carrier.
payment of freight
[Caltex v. Sulpicio Contract of affreightment – one in which the
Lines, G.R. No. owner of the vessel leases part or all of its
131166 (1999)]. space to haul goods for others.
A real contract A consensual contract
which exists only which can be It is a contract for special service, wherein the
after delivery of the dissolved by means of general owner retains the possession,
goods to be indemnity for losses command and navigation of the ship
transported is and damages.
made. The charterer or freighter merely has use of the
space in the vessel in return for his payment of
Persons who make a charter: the charter hire.
a. Owner or owners of the vessel, either in
whole or in part, who have legal control and The rights, responsibilities of ownership rest on
possession of the vessel; the owner, and the charterer is usually free
b. Charterer may subcharter entire vessel to from liability to third persons in respect of the
3rd person only if not prohibited in original ship [Puromines Inc. v. CA, G.R. No. 91228
charter [Art 679, COC]; (1993)].
c. Ship agent if authorized by the owner/s or Bareboat or Demise Charter
given such power in the certificate of
appointment [Art 598, COC]; or In a bareboat or demise charter, the ship owner
d. Captain in the absence of the ship agent or leases to the charterer the whole vessel.
consignee and only if he acts in
accordance with the instructions of the The owner relinquishes, completely and
agent or owner and protects the latter’s exclusively, the possession, command and
interest [Art 609, COC]. navigation of the vessel

Requisites for a valid charter party:

a. Consent of the contracting parties;

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Anything short of such a complete transfer is a Common carrier is Common carrier is

contract of affreightment or not a charter party converted to private not converted to
at all. carrier private carrier

The master and crew of the vessel thereby Time Charter

become the charterer’s “servants” [AQUINO
(2011)]. Time charter – a contract for the use of a
vessel for a specified period of time or for the
Thus, the charterer, by virtue of a demise duration of one or more specified voyages.
charter, is considered the owner pro hac vice.
The owner of a time-chartered vessel retains
He mans and equips the vessel and assumes possession and control through the master and
all responsibility for navigation, management crew, who remain his employees.
and operation.
The time charterer acquires the right to:
He thus acts as the owner of the vessel in all  Utilize the carrying capacity and facilities of
important aspects during the duration of the the vessel; and
charter [Puromines Inc. v. CA, G.R. No. 91228  Designate her destinations during the term
(1993)]. of the charter [Litonjua Shipping Co., Inc. v.
National Seamen Board, G.R. No. L-
Bareboat distinguished from contract of 51910(1989)].
affreightment
In a bareboat or demise charter, the common Voyage or Trip Charter
carrier is converted to private carrier.
In a voyage charter, the vessel is leased for a
Although a charter party may transform a single or particular voyage.
common carrier into a private one, the same, The vessel is chartered for a carriage of goods
however, is not true in a contract of from one or more ports of loading to one or
affreightment on account of the distinctions more ports of unloading.
between a contract of affreightment and a
demise or bareboat charter [Puromines Inc. v. The master and crew remain the employ of the
CA, G.R. No. 91228 (1993)]. owner of the vessel [Litonjua Shipping Co., Inc.
v. National Seamen Board, G.R. No. L-51910
Demise or Contract of (1989)].
Bareboat Affreightment
Charterer becomes Owner remains The owner who retains possession of the ship
liable to others for liable as carrier and remains liable as carrier and must answer for
any breach caused must answer for any loss or non-delivery of the goods received for
by its negligence breach of duty transportation [Cebu Salvage Corp. vs.
Charterer regarded Charterer is not Philippine Home Assurance Corp., G.R. No.
as owner pro hac regarded as owner 150403 (2007)].
vice for the voyage

Owner of vessel The vessel owner 2. Liability of Ship Owners and

relinquishes retains possession, Shipping Agents
possession, command, and
command, and navigation of the The persons participating in maritime
navigation to ship commerce are the following:
charterer a. Ship owners or ship agents;
b. Captains and masters;
c. Other officers and crew;

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d. Supercargoes.  Buys cargo to be brought back on the

return voyage of the ship, and comes home
Ship Owner - has possession, control and with it.
management of the vessel.
 >He has the consequent right to direct her The ship owner or ship agent is liable:
navigation and receive freight earned and a. For the acts of the captain, unless the latter
paid, while his possession continues; exceeds his authority [Art. 586, COC];
 He is the person who is PRIMARILY liable b. For contracts entered into by the captain to
for damages sustained in the operation of repair, equip and provision the vessel,
the vessel, based on the provisions of the provided that the amount claimed was
Code of Commerce. invested for the benefit of the vessel [Art.
586, COC];
Ship Agent - the person entrusted with the c. For the indemnities in favor of third persons
provisioning of a vessel, or who represents her which may arise from the conduct of the
in the port in which she happens to be [Art. 586, captain in the care of the goods
COC]. transported, as well as for the safety of
 The ship agent is SOLIDARILY liable with passengers transported [Art. 587, COC];
the owner; d. For damages to third persons for tort or
 The joint and several liability applies both quasi-delict committed by the captain,
for breach of contract and extra-contractual except collision with another vessel [Art.
obligation such as tort; 1759, NCC];
 The ship agent, even though he is not the e. For damages in case of collision due to the
owner, is liable in every way to the creditor fault, negligence, or want of skill of the
for losses and damages, without prejudice captain, sailing mate, or any other member
to the right of the owner, the vessel and its of the complement [Art. 826, COC].
equipment and freight [Aquino].
Captains - those who govern vessels that Liability for Acts of Captain
navigate the high seas or ships of large
dimensions and importance, although they Three (3) distinct roles of a captain:
may be engaged in coastwise trade. 1. General agent of the ship owner;
2. Commander and technical director of the
Masters - those who command smaller ships vessel;
engaged exclusively in coastwise trade. In 3. Representative of the country under whose
maritime commerce, masters and captains are flag he navigates [Inter-Orient Marine
the same. Enterprises v. NLRC, G.R. No. 115286
(1994)].
Crew - a person on board who is involved in
highly technical tasks and in the manning of the The captain shall be liable to the agent, and the
vessel (e.g. master, mate). latter to third persons [Art. 618, COC]:
1. For all the damages suffered by the vessel
Complement - a person, not a crew, who is not and his cargo by reason of want of skill or
directly involved in the manning of the vessel negligence on his part;
(e.g. cook). 2. For all the thefts committed by the crew,
reserving his right of action against the
Supercargo - a person on board the vessel, guilty parties;
who: 3. For the losses, fines, and confiscations
 Functions as an agent of the owner of the imposed on account of violation of the laws
goods shipped as cargo on a vessel; and regulations of customs, police, health,
 Has charge of the cargo on board; and navigation;
 Sells the cargo to the best advantage in the 4. For the losses and damages caused by
foreign markets; mutinies on board the vessel, or by reason

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of faults committed by the crew in the  Induce capitalists into effectively wagering
service and defense of the same, if he does their resources against the consideration of
not prove that he made full use of his the large profits attainable in the trade
authority to prevent or avoid them; [Aboitiz Shipping Corp. v. General Accident
5. For those arising by reason of an undue Fire and Life Assurance Corp., G.R. No.
use of powers and non-fulfillment of the 100446 (1993)].
obligations which are his;
6. For those arising by reason of his going out Thus, under the doctrine of abandonment:
of his course or taking a course which he 1. The agent shall be civilly liable for the
should not have taken without sufficient indemnities in favor of third persons which
cause, in the opinion of the officers of the arise from the conduct of the captain in the
vessel at a meeting with the shippers or care of the goods which the vessel carried,
supercargoes who may be on board; but he may exempt himself therefrom by
7. For those arising by reason of his abandoning the vessel with all her
voluntarily entering a port other than that of equipment and the freight he may have
his destination; earned during the voyage [Art. 587, COC];
8. For those arising by reason of non- 2. The owners of a vessel shall be civilly
observance of the provisions contained in liable in the proportion of their contribution
the regulations on situation of lights and to the common fund, for the results of the
maneuvers for the purpose of preventing acts of the captain, referred to in Art. 587.
collisions. Each part owner may exempt himself from
this liability by the abandonment before a
Exceptions to Limited Liability notary of the part of the vessel belonging to
him [Art. 590, COC];
The Doctrine of Limited Liability 3. In case of collision, the liability of the ship
(Hypothecary Rule) owner shall be understood as limited to the
The real and hypothecary nature of maritime value of the vessel with all her
law simply means that the liability of the carrier appurtenances and all the freight earned
in connection with losses related to maritime during the voyage [Art. 837, COC];
contracts is confined to the vessel, which is 4. If the vessel and her freight should be
hypothecated for such obligations or which totally lost, by reason of capture or wreck,
stands as the guaranty for their settlement. all rights of the crew to demand any wages
whatsoever shall be extinguished, as well
The liability of the vessel owner and agent as the agent for the recovery of the
arising from the operation of such vessel is advances made [Art. 643, COC].
confined to the vessel itself, its equipment, If the ship owner or agent may in any way be
freight, and insurance, if any held civilly liable at all for injury to or death of
passengers arising from the negligence of the
Originated by reason of the conditions and captain in cases of collisions or shipwrecks, his
risks attending maritime trade in its earliest liability is merely co-extensive with his interest
years, when such trade was replete with in the vessel such that a total loss thereof
innumerable and unknown hazards since results in its extinction [Yangco v. Laserna,
vessels had to go through largely uncharted G.R. No. L-47447 (1941)].
waters to ply their trade.
Exceptions to the Limited Liability Rule
Ratio: Such limitation of liability was designed (1) Claims under the Workmen’s
to – Compensation Act [Abueg v. San Diego,
 Offset adverse conditions; G.R. No. L-773 (1946)];
 Encourage people and entities to venture (2) Expenses for repairing, provisioning and
into maritime commerce despite the risks equipping the vessel [Government v
and the prohibitive cost of shipbuilding; and

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Insular Maritime, G.R. No. L-21495

(1924)]; The owner of the goods which gave rise to the
(3) There is an actual finding of negligence on expense or suffered the damage shall bear this
the part of the vessel owner or agent average [Art. 810, COC].
[Aboitiz Shipping v. General Accident Fire
and Life Assurance Corp., G.R. No. GENERAL AVERAGE
100446 (1993)]; General or gross averages shall include all the
(4) Vessel is insured, to the extent of the damages and expenses which are deliberately
insurance proceeds [Vasquez v. CA, G.R. caused in order to save the vessel, her cargo,
No. L-42926 (1985)]; or both at the same time, from a real and
(5) There was no total loss and the vessel is known risk [Art. 811, COC].
not abandoned [Yangco v. Laserna, G.R.
No. L-47447 (1941)]; The gross or general average shall be borne by
(6) Collision between two negligent vessels. those who benefited from the sacrifice. These
include the ship owner and the owners of the
3. Accidents and Damages in cargoes that were saved. Contribution may
also be imposed on the insurers of the vessel
Maritime Commerce or cargoes that were saved, as well as lenders
on bottomry or respondentia.
General Average
Requisites
Averages pertain to expenses and damages: 1. There must be a common danger;
a. Expense – to constitute an average, an 2. That for the common safety, part of the
expense must be: vessel or of the cargo or both is sacrificed
a. Extraordinary or accidental; deliberately;
b. Incurred during the voyage; and 3. That from the expenses or damages
c. Incurred in order to preserve the caused follows the successful saving of the
vessel, the cargo, or both. vessel and cargo; and
b. Damages or Deterioration – to constitute 4. That the expenses or damages should
an average, it must: have been incurred or inflicted after taking
a. Have been suffered by the vessel proper legal steps and authority
from the time the vessel put to sea [Magsaysay, Inc. v. Agan, G.R. No. L-6393
from the port of departure until it (1955)].
casts anchor in the port of
destination; and Common danger means both the ship and the
b. Have been suffered by the cargo, after it has been loaded, are subject to
merchandise from the time they are the same danger.
loaded in the port of shipment until  Whether during the voyage, or in the port
they are unloaded in the port of of loading or unloading;
consignment [Art. 806, COC].  Whether the danger arises from the
accidents of the sea, dispositions of the
There are two kinds of averages: authority, or faults of men;
1. Particular or simple average; and  Provided that the circumstances producing
2. Gross or general average. the peril may rationally be said to be certain
and imminent;
PARTICULAR AVERAGE  Excludes measures undertaken against a
Particular or simple averages shall include all distant peril [Magsaysay, Inc. v. Agan, G.R.
damages and expenses caused to the vessel No. L-6393 (1955)].
or cargo that did not inure to the common
benefit and profit of all persons interested in
the vessel and her cargo [Art. 809, COC].

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Note: When a vessel is stranded Government, or in order to repair the

unintentionally, the damages incurred cannot damage caused for the common good;
constitute general averages. 11. The loss suffered in the value of the goods
sold at arrivals under stress in order to
Cases of general average repair the vessel because of gross
1. The goods or cash invested in the average;
redemption of the vessel or cargo captured 12. The expenses of the liquidation of the
by enemies, privateers, or pirates, and the average [Art. 811, COC];
provisions, wages, and expenses of the 13. If in lightening a vessel on account of a
vessel detained during the time the storm, in order to facilitate her entry into a
arrangement or redemption is taking place; port or roadstead, part of her cargo should
2. The goods jettisoned to lighten the vessel, be transferred to lighters or barges and be
whether they belong to the vessel, to the lost, the owner of said part shall be entitled
cargo, or to the crew, and the damage to indemnity, as if the loss has originated
suffered through said act by the goods from a gross average [Art. 817, COC];
kept; 14. If, as a necessary measure to extinguish a
3. The cables and masts which are cut or fire in a port; roadstead; creek, or bay, it
rendered useless, the anchors and the should be decided to sink any vessel, this
chains which are abandoned in order to loss shall be considered gross average, to
save the cargo, the vessel, or both; which the vessels saved shall contribute.
4. The expenses of removing or transferring a
portion of the cargo in order to lighten the Jettison – The act of throwing overboard part
vessel and place her in condition to enter a of a vessel’s cargo or hull in hopes of saving a
port or roadstead, and the damage ship from sinking.
resulting therefrom to the goods removed
or transferred; The captain shall direct the jettison, and shall
5. The damage suffered by the goods of the order the goods cast overboard in the following
cargo through the opening made in the order:
vessel in order to drain her and prevent her 1. Goods on deck - beginning with those
sinking; which embarrass the maneuver or damage
6. The expenses caused through floating a the vessel, preferring if possible, the
vessel intentionally stranded for the heaviest ones with the least utility and
purpose of saving her; value;
7. The damage caused to the vessel which is 2. Goods below the upper deck - always
necessary to break open, scuttle, or smash beginning with those of the greatest weight
in order to save the cargo; and smallest value to the amount and
8. The expenses of curing and maintaining number absolutely indispensable [Art. 815,
the members of the crew who may have COC].
been wounded or crippled in defending or
saving the vessel; To include the goods jettisoned in the general
9. The wages of any member of the crew or gross average, the existence of the cargo or
detained as hostage by enemies, goods must be proved:
privateers, or pirates, and the necessary 1. For cargo – by means of bill of lading;
expenses which he may incur in his 2. For good belonging to the vessel – by
imprisonment, until he is returned to the means of the inventory prepared prior to
vessel or to his domicile, should he prefer departure [Art. 816, COC].
it;
10. The wages and victuals of the crew of a Jason clause
vessel chartered by the month during the Jason clause is a provision in the contract of
time it should be embargoed or detained by carriage that requires the cargo owners to
force majeure or by order of the contribute in the general average, though the

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event which gave rise to the sacrifice or

expenditure may have been due to the fault of Ratio: The steamer’s greater facility of
one of the parties to the adventure [Rule D, maneuvering over a sail vessel means it has
York Antwerp Rules]. the greater ability to avoid collisions [A. Urrutia
& Co. v. Baco River Plantation Co, G.R. No. L-
Note: This shall not prejudice any remedies or 7675. [1913)].
defenses which may be open against or to that
party in respect of such fault. Collision between Two Power-Driven
Vessels
Procedure for recovery General Rule: When two power-driven vessels
1. Assembly and deliberation with the sailing are meeting head on, or nearly head on, so as
mate and other officers; to involve risk of collision, each shall alter her
2. Resolution of the captain adopted; course to starboard (right side).
3. Hearing of the persons interested. In case
an interested person should not be heard, Ratio: So that each may pass on the port (left)
he shall not contribute to the gross average side of the other [Smith Bell and Co. v. CA,
[Art. 813, COC]; G.R. No. L-56294 (1991)].
4. Resolution to be entered in the log book,
stating the motives and reasons therefore Liability in Collision Cases
as well as the votes and reason for Liability in collision cases is negligence-based.
disagreement [Art. 814, COC]; Courts are called upon to determine the
5. Minutes to be signed by all the persons negligence of the persons involved in order to
present or in urgent cases, the captain; impose liability.
6. Captain shall deliver one copy of the
minutes to the maritime judicial authority of The person who caused the injury is both civilly
the first port he may make within 24 hours and criminally liable [Aquino].
[Art. 814, COC];
7. Captain shall ratify the minutes under oath Nevertheless, the rules that apply to quasi-
[Art. 814, COC]. delict cannot be applied to collision cases.

Collisions and Allisions The doctrine of last clear chance and the rules
on contributory negligence cannot be applied in
Collision is an impact or sudden contact collision cases.
between two moving vessels [Aquino].
This is in accordance with Art. 827 of the Code
Allision is the striking of a moving vessel of Commerce.
against one that is stationary.
Thus, if both vessels were negligently
Collision between a Steam and a Sail Vessel operated, each must suffer its own damage
General Rule: When meeting a sailing vessel, even if the other has the last clear chance of
whether close hauled or with the wind free, the avoiding the injury [C.B. Williams v. Yangco,
sail vessel has a right to keep her course, and G.R. No. L-8325 (1914)].
it is the duty of the steamer to adopt
precautions as will avoid the sail vessel. Similarly, proof that the plaintiff was negligent
will bar recovery from the defendant in collision
In a collision between a steam vessel and a sail cases even if the plaintiff’s negligence can be
vessel, the presumption is against the steam classified as merely contributory [Gorgonio De
vessel. Sarasola v. Yu Biao Sontua, G.R. No. L-22630
(1925)].
The steam vessel must show that she took the
proper measures to avoid a collision.

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Classes of Collision Application

a. Fortuitous - none was at fault;
b. Culpable - one or more vessels were at COGSA (Commonwealth Act No. 65) is a
fault; special law that governs all contracts of
c. Inscrutable Fault - it cannot be determined carriage of goods by sea between or to and
which of the vessels was at fault. from the Philippine ports.

Fortuitous Its application is according to the following

When collision is due to a fortuitous event or scheme:
force majeure, each vessel and its cargo shall Common Carrier Private carrier
bear its own damages [Art. 830, COC].
When, by reason of force majeure, a vessel Coming to the Philippines from foreign trade*
properly anchored and moored collides with New Civil Code COGSA
another, the injury occasioned shall be looked (Common Carriers) Code of Commerce
upon as particular average to the vessel run COGSA New Civil Code
into [Art. 832, COC]. Code of Commerce (Provisions NOT on
common carriers, i.e.
Culpable torts, contracts)
When only one vessel is at fault, the owner of From Philippines to foreign country
the vessel at fault shall indemnify the losses Apply laws of such foreign country [1753,
and damages suffered, after an expert NCC]
appraisal. *Nothing stops parties from stipulating that
COGSA shall primarily apply; even domestic
When both vessels are at fault, each shall carriers can stipulate such. With respect to
suffer its own damages, and both shall be vessels destined for foreign ports, the COGSA
solidarily responsible for the losses and does not apply unless parties make it
damages occasioned to their cargoes [Art. 826, applicable.
COC].
Under Art. 1766, in all matters not regulated by
Note: The ship owners cannot successfully the Civil Code, the rights and obligations of
maintain an action against the other for the loss common carriers shall be governed by the
or injury to his vessel. Code of Commerce and special laws. Thus,
although a special law, COGSA only applies
When a third vessel is at fault, the owner of the when the Civil Code has no provision dealing
third vessel shall indemnify the losses and with the matter.
damages caused, the captain thereof being
civilly liable to said owner [Art. 831, COC]. Notice of Loss or Damage
Inscrutable Fault Notice of claim and the general nature of the
In case of inscrutable fault, that is, if it cannot loss or damage must be given in writing to the
be decided which of the two vessels was the carrier or his agent at the port of discharge
cause of the collision, each shall bear his own before or at the time of the removal of the
damage and both shall be jointly responsible goods [Section 3(6), COGSA].
for the losses and damages suffered by their
cargoes [Art. 828, COC]. If damage is not patent or cannot be
ascertained from the package, the shipper
4. Carriage of Goods by Sea Act should file the claim with the carrier within three
(COGSA) days from delivery.

Under Section 3(6), COGSA, a failure to file a

notice of claim within three (3) days will not bar

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recovery if it is nonetheless filed within one but only if the amount so declared is the real
year. value of goods [Aquino].

This one-year prescriptive period also applies The Civil Code does not limit the liability of the
to the shipper, the consignee, the insurer of the common carrier to a fixed amount per package.
goods or any legal holder of the bill of lading. Thus, the COGSA, supplements the Civil Code
Inasmuch as the neither the Civil Code nor the by establishing a statutory provision limiting the
Code of Commerce states a specific carrier’s liability in the absence of a shipper’s
prescriptive period on the matter, the COGSA declaration of a higher value in the bill of lading
may be applied [Belgian Overseas Chartering [Belgian Overseas Chartering and Shipping v.
and Shipping v. Philippine First Ins. Co, G.R. Philippine First Ins. Co, G.R. No. 143133
No. 143133 (2002)]. (2002)].

Note: In the Warsaw Convention, as well as the

Code of Commerce, the notice requirement is F. PUBLIC SERVICE ACT
a condition precedent for the right of action
against the shipowner to accrue.

Period of Prescription
1. Definition of Public Utility
A public utility is a business or service engaged
The carrier and the ship shall be discharged
in regularly supplying the public with some
from all liability in respect of loss or damage
commodity or service of public consequence
unless suit is brought within one year after
such as electricity, gas, water, transportation,
delivery of the goods or the date when the
telephone, or telegraph service [National
goods should have been delivered.
Power Corporation v. Court of Appeals, G.R.
No. 112702 (1997)].
The absence of a notice shall not affect or
prejudice the right of the shipper to bring suit
Elements of a public utility:
within one year after the delivery of the goods
1. There must be public interest or
or the date when the goods should have been
consequence;
delivered [Section 3 (6), COGSA].
2. Private property devoted to public use;
3. Offers to the public indiscriminately ;
COGSA, as a special law, prevails over the
4. For hire/ compensation.
general provisions of the Civil Code on
prescription of actions [Maritime Agencies &
Services, Inc. v. CA, G.R. No. 77638 (1990)]. 2. Necessity for certificate of
public convenience
Limitation of Liability
No public service as herein defined shall
Under Section 4(5), COGSA, the limit is set at operate in the Philippines without having first
a maximum of $500 per package or customary secured from the Commission a certificate,
freight unit. which shall be known as Certificate of Public
Convenience (CPC) or as Certificate of Public
This is deemed incorporated in the bill of lading Convenience and Necessity (CPCN) [Section
even if not mentioned therein [Eastern 15, Public Service Act].
Shipping Lines v. IAC, G.R. No. L-69044
(1987)]. Requisites
The declaration made by the shipper stating an The ff. are the requisites before a Certificate of
amount bigger than $500 per package will Public Convenience (CPC) may be granted:
make the carrier liable for such bigger amount,

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1. The applicant must be a citizen of the financial capacity of the holder of the license,
Philippines, or a corporation or co- so that liabilities arising from accidents may be
partnership, association or joint stock duly compensated [Dizon v Octavio, 51 O.G.
company constituted and organized under 4059 (1955)].
the laws of the Philippines, 60 per centum
at least of the stock or paid-up capital of Prior operator rule
which belong entirely to citizens of the
Philippines; Meaning
2. The applicant must prove that the
operation of the public service proposed The first licensee should have more or less of
and the authorization to do business will a vested and preferential right over a person
promote the public interest in a proper who seeks to acquire another and a later
and suitable manner; license over the same route, so long as the first
3. The applicant must be financially capable licensee:
of undertaking the proposed service and  Keeps and performs the terms and
meeting the responsibilities incident to its conditions of its license; and
operations [Vda. De Lat v. Public Service  Complies with the reasonable rules
Commission, G.R. No. L-34978 (1988)]. and regulations of the Commission and
meets the reasonable demands of the
Citizenship public.

No franchise, certificate, or any other form of Rationale: Without such preferential right, the
authorization for the operation of a public utility first licensee would not have protection on his
shall be granted except to: investment, and would be subject to ruinous
(1) Citizens of the Philippines; or competition and thus defeat the very purpose
(2) Corporations or associations organized and intent for which the Public Service
under the laws of the Philippines at least Commission was created [Batangas
sixty per centum of whose capital is owned Transportation Co., G.R. No. L-28865 (1928)].
by such citizens [Section 11, Article XII,
1987 Constitution]. Exceptions

Promotion of public interests 1. Where public interest and convenience

would be better served by the new
Property becomes clothed with a public interest operator;
when used in a manner to make it of public 2. Where the old operator failed to make an
consequence and affect the community at offer to meet the increase in traffic;
large. 3. Where the CPC granted to the new
operator is a maiden franchise;
When one devotes his property to a use in 4. When the application of the rule would be
which the public has an interest, he, in effect, conducive to monopoly [Mandbusco Inc. v.
grants to the public an interest in that use, and Francisco, G.R. No. L-23688 (1970)].
must submit to be controlled by the public for
the common good, to the extent of the interest iii. Ruinous competition
he has thus created [North Negros Sugar Co.
vs. Hidalgo, G.R. No. L-42334 (1936)]. There is ruinous competition if:
a. The operator would be deprived of their
Financial capability profits on the capital invested in its
business;
One of the primary factors considered in the b. The business would not have sufficient
granting of a certificate of public convenience gains to pay a fair rate of interest on its
for the business of public transportation is the capital investments.

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b. rate base; and

In order that the opposition based on ruinous c. the return itself or the computed revenue to
competition may prosper, it must be shown that be earned by the public utility based on the
the opponent would be deprived of their rate of return and rate base.
profits on the capital invested in its business.
 The mere possibility of reduction in the The rate of return is a judgment percentage
earnings of a business is not sufficient to which, if multiplied with the rate base, provides
prove ruinous competition. a fair return on the public utility for the use of its
 It must be shown that the business would property for service to the public.
not have sufficient gains to pay a fair rate  The rate of return of a public utility is not
of interest on its capital investments [Vda. prescribed by statute but by administrative
De Lat v. Public Service Commission, G.R. and judicial pronouncements.
No. L-34978 (1988)].  This Court has consistently adopted a 12%
rate of return for public utilities [Republic
3. Fixing of rate of the Philippines v. Manila Electric
Company, G.R. No. 141314 (2002)].
Rationale for control by the government
The investor agrees, by embarking capital in a Exclusion of income tax as
utility, that its charges to the public shall be expense
reasonable. His company is the substitute for
the State in the performance of the public Income derived from any public utility or from
service, thus becoming a public servant. The the exercise of any essential government
compensation which the Constitution function accruing to the Philippine government
guarantees an opportunity to earn is the or to any political subdivision is excluded from
reasonable cost of conducting the business gross income [Sec. 32(B)(7)(b), NIRC].
[Republic of the Philippines v. Manila Electric
Company, G.R. No. 141314 (2002)]. 4. Unlawful arrangements
Standard for fixing of rates
In the fixing of rates, the only standard which Boundary system
the legislature is required to prescribe for the
guidance of the administrative authority is that
Under the boundary system, the driver:
the rate be reasonable and just. (1) Rents the vehicle, typically a jeepney, from
the owner or operator by paying a fee
What is a just and reasonable rate is a question called the “boundary” fee;
of fact calling for the exercise of discretion,
(2) Pays for fuel and maintenance of the
good sense, and a fair, enlightened and
vehicle.
independent judgment. The requirement of
reasonableness comprehends such rates
Whatever the driver earns from passenger
which must not be so low as to be confiscatory,
fares in excess of the boundary fee is his
or too high as to be oppressive [Republic of the
income [Paguio Transport Corp. v. National
Philippines v. Manila Electric Company, G.R.
Labor Relations Commission, G.R. No. 11950
No. 141314 (2002)].
(1998)].

Rate of return Kabit system

In determining the just and reasonable rates to
Definition
be charged by a public utility, three major The kabit system is an arrangement “whereby
factors are considered by the regulating a person, who has been granted a CPC allows
agency: another person, who owns motor vehicles. to
a. rate of return;
operate under such franchise for a fee” [Teja

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Marketing v. Intermediate Appellate Court, Before the sale, encumbrance, or lease of

G.R. No. L-65510 (1987)]. public utility property or assets, the Public
Service Act requires the approval of the PSC.
Rationale against the kabit system  There should be a public hearing, with
1. it is an abuse of the certificate of public notice to all interested parties before the
convenience, a special privilege conferred approval is granted;
by the government;  The PSC must first determine if there are
2. it is one of the root causes of the good and reasonable grounds justifying the
prevalence of graft and corruption in the transfer or lease of the property covered by
government transportation offices; the franchise, or if the sale or lease is
3. it is contrary to public policy, and is detrimental to public interest.
therefore void and inexistent [Teja
Marketing v. Intermediate Appellate Court, Rationale: A franchise is personal in nature.
G.R. No. L-65510 (1987)]. Any transfer or lease thereof should be notified
to the PSC so that the latter may take proper
Effect of the kabit system safeguards to protect the interest of the public.
 Although not outrightly penalized as a
criminal offense, the kabit system is If the property covered by the franchise is
invariably recognized as being contrary to transferred or leased to another without
public policy and, therefore, void and in obtaining the requisite approval:
existent [Art. 1409, NCC]. (1) The transfer is not binding against the
o It is a fundamental principle that the Public Service Commission; and
court will not aid either party to enforce (2) The grantee continues to be responsible
an illegal contract, but will leave both under the franchise in relation to the
where it finds them [Art. 1412, NCC]; Commission and to the public [Montoya v.
o Courts will not grant affirmative relief Ignacio, G.R. No. L-5868 (1953)].
to parties in cases where they set up a
Kabit system. They are in pari delicto
and the Court will simply leave them G. THE WARSAW
where it found them [Lita Enterprises, CONVENTION
Inc. v. IAC, G.R. No. 64693 (1984)].
 The operator of record is considered the
operator of the vehicle in contemplation of 1. Applicability
law as regards the public and third
persons, even if the vehicle involved in the The Warsaw Convention applies to:
accident had been sold to another [Santos All international carriage of persons,
v Sibug, G.R. No. L-26815 (1981)]. baggage, or cargo performed by aircraft for
o Where such sale had not been reward;
approved by the then Public Service Gratuitous carriage by aircraft performed
Commission (PSC). by an air transport undertaking [Art. 1(1),
Warsaw Convention].
See also Registered Owner Rule under A. 2.
Liabilities of Common Carriers International air carriage or international air
transport means transportation by air between
points of contact of two high contracting
5. Approval of sale, parties, or those countries that have acceded
encumbrance or lease of to the Warsaw Convention, wherein the place
property of departure and the place of destination are
situated:
a. Within the territories of two high contracting
parties, regardless of whether or not there

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be a break in the transportation or a place during the transportation by air [Art. 18,
transshipment; or WC].
b. Within the territory of a single >high
contracting party, if there is an agreed The Warsaw Convention does not provide for
stopping place within a territory subject to an exclusive enumeration of instances when
the sovereignty, mandate or authority of the carrier is liable.
another power, even though the power is  It does not provide an absolute limit of
not a party to the Convention [Art. 1(2), liability and it does not preclude the
WC]. application of the Civil Code and other
pertinent local laws in the determination of
A carriage to be performed by several the extent of liability of the common carrier
successive air carriers is deemed, for the [Philippine Airlines v. CA, G.R. No. (1996)].
purposes of the Convention, to be one  Hence, a complaint for quasi-delict can still
undivided carriage, if it has been regarded by be filed even if the filing is beyond the
the parties as a single operation, whether it had prescriptive period provided for under the
been agreed upon under the form of a single Convention so long as it is within the
contract or of a series of contracts [Art. 1(3), prescriptive period of four years under the
WC]. Civil Code [Villanueva].

The carrier is liable for damages for: Notice of claim with the international carrier is
a. Death or injury of a passenger if the a mandatory or condition precedent under the
accident causing it took place: Warsaw Convention.
1. On board the aircraft; a. Baggage: within 3 days from receipt. In
2. In the course of the operations of case of delay, within 14 days from the time
embarking or disembarking; or the baggage was placed at the disposal of
3. When there was delay [Art. 17 and 19, the passenger;
WC]. b. Goods: within 7 days from delivery.
b. Destruction, loss, or damage to any
baggage or goods that are checked in, if In case of an action for damage to passenger
damage occurred: baggage, the case must be filed in court within
1. During the transportation by air; or two years.
2. When there was delay [Art. 18 and 19,
WC]. 2. Limitation of Liability
c. Delay in the transport by air of
passengers, baggage or goods [Art. 19, Any provision tending to relieve the carrier of
WC]. liability or to fix a lower limit than that which is
laid down shall be null and void, but the nullity
The carriage by air contemplated comprises of any such provision does not involve the
the period in which the baggage or goods are nullity of the whole contract [Art. 23, WC].
in charge of the carrier, whether in an airport or
on board an aircraft, or, in the case of a landing Availing of Provisions Excluding/Limiting
outside an airport, in any place whatsoever. Liability
The carrier shall not be entitled to avail himself
It does not cover any transportation by land, by of the provisions which exclude or limit his
sea, or by river performed outside an airport. liability, if:
(1) The damage is caused by his willful
If transportation takes place in the performance misconduct or by such default on his part,
of a contract by air, for the purpose of loading, as is considered to be equivalent to willful
delivery, or transshipment, any damage is misconduct; or
presumed, subject to proof to the contrary, to
have been the result of an event which took

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(2) The damage is caused as aforesaid by any General rule: “In the carriage of cargo, the
agent of the carrier acting within the scope liability of the carrier is limited to a sum of 17
of his employment [Art. 25, WC]. Special Drawing Rights per kilogramme”
[Art. 22(1), WC as amended by Additional
Sec. 22(2), WC does not operate as an Protocol No. 3 (1975)].
exclusive enumeration of the instances of an
airline’s liability, or as an absolute limit of the Exception: The limit does not apply when the
extent of that liability. The Convention’s consignor has made, at the time when the
provisions do not regulate or exclude the package was handed over to the carrier, a
following areas: special declaration of the value at delivery and
(1) Liability for other breaches of the contract has paid a supplementary sum if the case so
by the carrier; requires.
(2) Misconduct of its officers and employees;
and In that case, the carrier will be liable to pay a
(3) For some particular or exceptional type of sum not exceeding the declared sum, unless
damage (i.e. moral, nominal, temperate or he proves that that sum is greater than the
exemplary damages) [Alitalia v. IAC, G.R. actual value to the consignor at delivery [Art.
No. 71929 (1990)]. 22(2), WC].

Right to Damages Liability for Hand-Carried Baggage

The right to damages under the WC is
extinguished after two years from the date of As regards hand-carried baggage, the liability
arrival at the destination or from the date on of the carrier is limited to “332 Special
which the aircraft ought to have arrived, or from Drawing Rights per passenger” [Art. 22(3)
the date on which the carriage stopped. The WC, as amended by Additional Protocol No. 2
method of calculating the period of limitation (1975)].
shall be determined by the law of the Court
seized of the case [Art. 29, WC]. The Guatemala Protocol of 1971 increased the
limit for passengers to $100,000 and for
Liability to Passengers baggage to $1,000. However, the Supreme
Court noted in Santos III v. Northwest Orient
General rule: In the carriage of passengers, Airlines [G.R. No. 101538(1992)], that the
the liability of the carrier for each passenger is Guatemala Protocol is still ineffective
limited to “100,000 Special Drawing Rights [Sundiang and Aquino].
for the aggregate of the claims” in respect of
damage suffered as a result of death or The Warsaw Convention should be deemed a
personal injury to each passenger [Art. 22(1), limit of liability only in those cases where:
WC as amended by Additional Protocol No. 3 (1) The cause of death or injury to person, or
(1975)]. destruction, loss or damage to property or
delay in its transport is not attributable to or
Exception: By special contract, the carrier and attended by:
the passenger may agree to a higher limit [Art. a. Any willful misconduct, bad faith,
22(1), WC]. recklessness; or
b. Otherwise improper conduct on the
Note: Special drawing rights are part of any official or employee for
supplementary foreign exchange reserve which the carrier is responsible;
assets defined and maintained by the and
International Monetary Fund. (2) There is otherwise no special or
extraordinary form of resulting injury
Liability for Checked Baggage [Alitalia v. IAC, G.R. No. 71929 (1990)].

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Note: The Montreal Convention 1999 changed

the limits of liability in relation to delay,
baggage and cargo as follows:
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 x x x;
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 kilogramme
x x x [Art. 22, Montreal Convention].

3. Willful Misconduct

A common carrier may not avail of the limitation

in the following cases:
a. Willful misconduct;
b. Default amounting to willful misconduct
[Art. 25, WC];
c. Accepting passengers without ticket [Art.
3(2), WC];
d. Accepting goods without airway bill or
baggage without baggage check.

Receipt by the person entitled to the delivery of

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 [Art. 26, WC].

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