Transportation &

Public Service Law

...Cheat Sheet. Ssssh!!1
Applicability of COGSA
The provisions of the Carriage of Goods by. Sea
Act on limited liability are as much a part of a
bill of lading as though physically in it and as
much a part thereof as though placed therein by
agreement of the parties. 80. Eastern Shipping
Lines Inc. v. IAC 150 SCRA 463
Standard of Care Required for
Common Carriers
 Diligence Required
from a Common Carrier
Article 1733.
Common carriers,
 from the nature of their business and for reasons of public policy,
 are bound to observe extraordinary diligence
 in the vigilance over the goods and f
 or the safety of the passengers transported by them,
according to all the circumstances of each case.

There is breach of this obligation if it fails to exert extraordinary

diligence according to all the circumstances of the case in
exercise of the utmost diligence of a very cautious person.
17.Gacal v. PAL 183 SCRA 189
Sudden Emergency Rule
Where a carrier's employee is confronted with a
sudden emergency,
 When he is obliged to act quickly and without a
chance for deliberation must be taken into account,
 he must exercise only such care as any ordinary
prudent person would exercise under like
circumstances and conditions. 28. Isaac v. A.L
Ammen Transportation Co. 101 Phil 1046
 Standard of Care
Required for Carriage of Passengers
Article 1755.
A common carrier
 is bound to carry the passengers safely
 as far as human care and foresight can provide,
 using the utmost diligence of very cautious persons,
 with a due regard for all the circumstances.

Article 1757.
The responsibility of a common carrier for the safety of passengers
 as required in articles 1733 and 1755
 cannot be dispensed with or lessened by
 stipulation, the posting of notices, statements on tickets, or
otherwise.
 Exception to the General Rule on
Stipulations
Article 1758.
When a passenger is carried gratuitously,
 a stipulation limiting the common carrier's

liability for negligence is valid,

 but not for wilful acts or gross negligence.

The reduction of fare does not justify any

limitation of the common carrier's liability.
Passenger defined
Who is a passenger?
A passenger
one who travels in a public conveyance
by virtue of a contract, express or implied, with the carrier
as to the payment of fare, or
that which is accepted as equivalent thereof (10 Am Jur 2)
1. Jesusa vda. De Nueca v. MRR 85 OG (No. 13) 3151; 13
CAR 49

*Payment of Cash Not Necessary to be a Passenger. . Heirs

of Encarnacion Canas et al v. Dabatos et al 8 CAR 918
Who is not a passenger?
One who secures free passage by fraud or stealth is
precluded from recovery for injuries sustained
through negligence for he has not assumed the
status of the passenger.1. Jesusa vda. De Nueca v.
MRR 85 OG (No. 13) 3151; 13 CAR 49

Accommodation passengers are

 those who paid nothing for the service; and
 so they can be considered as invited guests within the
meaning of the law…
 Defendant is only required to observe ordinary
care. 2. Lara v. Valencia 104 Phil 65; 55 OG 4436
Presumption of Negligence
the Presumption of Fault or Negligence

In an action based on a contract of carriage, the

court need not make an express finding of fault
or negligence on the part of the carrier in order
to hold it responsible to pay the damages sought
for by the passenger.

This is an exception to the general rule that

negligence must be proved.” (Batangas
Transportation Company vs. Caguimbal, 22
SCRA 171.) 10.Vda de Abelo v. PAL 115 SCRA 489
Force Majeure in General see Art.
1734 for Force Majeuere in Art. 1734
To constitute a caso fortuito that would exempt a person from responsibility, it is
necessary that:
1. the cause of the unforeseen and unexpected occurrence... must be
independent of the human will;

2. it must be impossible to foresee the event which constitutes the ‘caso

fortuito’, or if it can be foreseen, it must be impossible to avoid;

3. the occurrence must be such as to render it impossible for the debtor to

fulfill his obligation in a normal manner; and

4. the obligor must be free from any participation in the aggravation of the
injury resulting to the creditor.
8.Vasquez v. Court of Appeals 138 SCRA 553; 12. Gatchalian v. Delim 203 SCRA 126;
16. Yobildo v. Court of Appeals 281 SCRA 1; 17.Gacal v. PAL 183 SCRA 189
Defect in Appliance
A passenger is entitled to recover damages from a carrier for an injury
 resulting from a defect in an appliance purchased from a
manufacturer,
 whenever it appears that the defect would have been discovered by the
carrier
 if it had exercised the degree of care which under the circumstances was
incumbent upon it, with regard to inspection and application of the necessary
tests.

The manufacturer is considered as being in law the agent or servant of

the carrier, as far as regards the work of constructing the appliance.
 Reason: Having no privity whatever with the manufacturer or vendor
of the defective equipment, the passenger has no remedy against him,
while the carrier usually has. 13. Necessito v. Paras 104 Phil 76; 56 OG
4023
Relationship between Carrier &
Passenger
Commencement of Relationship
The relation of the carrier and the passenger
 commences when a person puts himself in the care
of a carrier or directly under its control, with the
bona fide intention of becoming a passenger, and is
accepted as such by the carrier. (13 C.J.S. 1060) - 1.
Jesusa vda. De Nueca v. MRR 85 OG (No. 13) 3151; 13
CAR 49

Note: Common Carrier must give reasonable time

for passenger to alight or board safely. 5.
Dangwa Transportation Co. v. Court of Appeals 202
SCRA 574
Subsistence of Relationship
Passenger at an intermediate section A passenger who, without objection
from the carrier, alights at an intermediate station, which is a station for the
discharge and reception of passengers, for any reasonable and usual purpose,
such as that of obtaining refreshment, or for exercise or other matters of
convenience or necessity does not lose his status as a passenger. 24. Sarreai v.
Soliman 8 CAR 960

The carrier-passenger relationship is not terminated

 merely by the fact that the person transported has been carried to his
destination
 if, for example, such person remains in the carrier’s premises to claim his
baggage.
 That reasonableness of time should be made to depend on the attending
circumstances of the case.
 The primary factor to be considered is the existence of a reasonable cause as will
justify the presence of the victim on or near the carrier’s vessel. 23. Aboitiz Shipping
Corp. v. Court of Appeals 179 SCRA 95
 Passenger’s
Duty to Observe Diligence
 Article 1761. The passenger must observe the
diligence of a good father of a family to avoid injury
to himself.

 Article 1762. The contributory negligence of the

passenger does not bar recovery of damages for his
death or injuries,
 if the proximate cause thereof is the negligence of the
common carrier,
 but the amount of damages shall be equitably reduced.
Acts of Employees and Passengers
or Strangers
Liabilities for Acts of Employees
Article 1759. Common carriers are
 liable for the death of or injuries to passengers
 through the negligence or wilful acts of the former's employees,
 although such employees may have acted beyond the scope of their
authority or in violation of the orders of the common carriers.

 This liability of the common carriers does not cease upon proof that
they exercised all the diligence of a good father of a family in the
selection and supervision of their employees.

Article 1760. The common carrier's responsibility prescribed in the

preceding article cannot be eliminated or limited by stipulation, by
the posting of notices, by statements on the tickets or otherwise
Acts of Passengers or Strangers
Article 1763. A common carrier is responsible for
injuries suffered by a passenger
 onaccount of the wilful acts or negligence of other
passengers or of strangers,
 if the common carrier's employees through the
exercise of the diligence of a good father of a
family could have prevented or stopped the
act or omission.
Bill of Lading
Bill of Lading
Comprehending all methods of transportation,
A bill of lading may be defined as
 a written acknowledgment of the receipt of goods
and
 an agreement to transport and to deliver them at a
specified place to a person named or on his order.
51. Mindanao Bus Co. v. Collector of Internal
Revenue 1 SCRA 538; 111 Phil 137.

 Bill not essential to contract 53. Robles v. Santos

44 OG 2268
Functions of a Bill of Lading
Operates both as a receipt and as a contract.
1. It is a receipt for the goods shipped.
2. A contract to transport and deliver the same as therein stipulated.
As a contract,
 it names the parties, which includes the consignee,
 fixes the route, destination, and freight rates or charges, and
 stipulates the rights and obligations assumed by the parties.
Being a contract, it is the law between the parties who are bound by its terms and conditions
provided that these are not contrary to law, morals, good customs, public order and
public policy.
3. [According to Perez, a bill of lading is also a legal evidence] ARTICLE 353. The legal
evidence of the contract between the shipper and the carrier shall be the bills of lading, by
the contents of which the disputes which may arise regarding their execution and
performance shall be decided, no exceptions being admissible other than those of falsity
and material error in the drafting.
 BUT SEE It is merely prima facie evidence of receipt of the merchandise by the
carrier or his agent. 48. P.O. Ailmall v. Macondray & Co. Inc. 48 OG 2271
“Said to Contain” Stipulations
 General Rule: Where the Carrier of the containerized cargo simply admits
the information furnished by the Shipper with regard to the goods it shipped
as reflected in the bill of lading,
 the matter quantity, description and conditions of the cargo is the sole
responsibility of the shipper.

 Exception: Where the Carrier of the containerized cargo makes an explicit

admission
 as to the weight, measurement marks, numbers, quality contents, and value, and
 more so, inscribed these admissions as stipulations in the bill of lading itself, or
 made them an addendum thereto, to which the carrier affixed its express
acknowledgment,

the Carrier now has prima facie received all the shipments in the sealed containers, it
has the burden to rebut the conclusion that it received the same without shortage.
57. Reyma Brokerage Inc. v. Phil. Home Assurance Corp. 202 SCRA 564
Clean and Claused Bill of Lading

Where the Carrier and the Shipping Agent accepted the subject cargo
and even agreed to the issuance of a clean bill of lading without
taking any exceptions with respect to the recitals contained therein,
they are therefore bound by the description appearing therein
and they are now estopped from denying the contents of the said bill.

A Clean Bill of Lading means that it does not indicate any defect in the
goods it covers

Note: The Carrier may simply refuse to accept the cargo or may make a
marginal note in the bill of lading indicating the true condition of the
merchandise [Claused Bill of Lading.] 50. Iron Bulk Shipping Co Ltd v
Remington Industrial Sales Corp. 417 SCRA 229
 Legitimate Holder of
the Bill of Lading
ARTICLE 711. The legitimate holder of a bill of
lading who fails to present it to the captain of
the vessel before the unloading obliging the
latter thereby to unload it and place it in
deposit,
shall be responsible for the expenses of
warehousing and other expenses arising
therefrom.
Bill of Lading in COGSA
SECTION 1. When used in this Act —

(b) the term "contract of carriage" applies only to

contracts of carriage covered by a bill of lading or any
similar document of title,
 insofar as such document relates to the carriage of goods
by sea,
 including any bill of lading or any similar document as aforesaid
issued
 under or pursuant to a charter party from the moment at
which such bill of lading or similar document of title
regulates the relations between a carrier and a holder of the
same.
Bill of Lading in COGSA
SECTION 3 Responsibilities and Liabilities
(3) After receiving the goods into his charge the Carrier, or the master or agent of
the Carrier, shall, on demand of the shipper, issue to the shipper a bill of
lading showing among other things:
(c) the apparent order and condition of the goods:
Provided, That no carrier, master, or agent of the carrier, shall be bound to
state or show in the bill of lading any marks, number, quantity, or weight
which he has reasonable ground for suspecting not accurately to represent
the goods actually received, or which he has had no reasonable means
of checking.

(4) Such a bill of lading shall be prima facie evidence of the receipt by the carrier
of the goods...
Bill of Lading in COGSA
(5) The Shipper shall be deemed to have guaranteed to
the carrier the accuracy
 at the time of shipment
 of the marks, number, quantity, and weight, as furnished by him; and
the shipper shall indemnify the carrier against all loss,
damages, and expenses arising or resulting from
inaccuracies in such particulars....
Airway Bill in Warsaw Convention
as amended by Hague Protocol
SECTION III Air Waybill

ARTICLE 5. Every carrier of goods has the right to require the consignor
to make out and hand over to him a document called an "air waybill";
every consignor has the right to require the carrier to accept this
document.

Article 8 .The air waybill shall contain:

(c) a notice to the consignor to the effect that,
if the carriage involves an ultimate destination or stop in a country other than
the country of departure,
the Warsaw Convention may be applicable and that the Convention
governs and in most cases limits the liability of carriers in respect of
loss of or damage to cargo.” Article VI of the Hague Protocol]
Airway Bill in Warsaw Convention
as amended by Hague Protocol
Article 9.
If, with the consent of the carrier, cargo is loaded on board the
aircraft without an air waybill having been made out, or
if the air waybill does not include the notice required by Article 8,
paragraph (c), the carrier shall not be entitled to avail
himself of the provisions of Article 22, paragraph 2.”
(pursuant to Article VII of the Hague Protocol])

[Article 22 provides for limitation of liability to to a sum of

250 francs per kilogram unless consignor declared higher
value, so it’s important to comply with these!!]
Rules on Diligence; Presumption
of Fault and Exemption
Force Majeure as Exemption
Article 1734. Common carriers are responsible for the loss, destruction,
or deterioration of the goods, unless the same is due to any of the
following causes only:
1. Flood, storm, earthquake, lightning, or other natural disaster or
calamity;
2. Act of the public enemy in war, whether international or civil;

3. Act or omission of the shipper or owner of the goods;

4. The character of the goods or defects in the packing or in the
containers;
5. Order or act of competent public authority.

Article 1743. If through the order of public authority the goods are seized
or destroyed, the common carrier is not responsible, provided said
public authority had power to issue the order.
General Rule: Presumption of Fault

Article 1735. In all cases other than those

mentioned in Nos. 1, 2, 3, 4, and 5 of the
preceding article,
if the goods are lost, destroyed or deteriorated,
common carriers are presumed to have been at
fault or to have acted negligently,
unless they prove that they observed
extraordinary diligence as required in article
1733.
Summary of Rules on Diligence; Presumption
of Fault and Exemption
In 72. Central Shipping Co. v. Ins. Co. of North America 438 SCRA 511 (2004), we reiterated the rules for
the liability of a common carrier for lost or damaged cargo as follows:

1. Common carriers are bound to observe extraordinary diligence over the goods they transport,
according to all the circumstances of each case;

2. In the event of loss, destruction, or deterioration of the insured goods, common carriers are
responsible, unless they can prove that such loss, destruction, or deterioration was brought about
by, among others, flood, storm, earthquake, lightning, or other natural disaster or calamity; and

3. In all other cases not specified under Article 1734 of the Civil Code, common carriers are
presumed to have been at fault or to have acted negligently, unless they observed extraordinary
diligence.

When the goods shipped are either lost or arrived in damaged condition, a presumption arises against
the carrier of its failure to observe that diligence, and there need not be an express finding of
negligence to hold it liable. To overcome the presumption of negligence, the common carrier
must establish by adequate proof that it exercised extraordinary diligence over the goods.
Duty of Diligence
Duration of Duty
Article 1736. The extraordinary responsibility of the common carrier lasts
 from the time the goods are unconditionally placed in the possession of, and received by the
carrier for transportation
 until the same are delivered, actually or constructively,
 by the carrier to the consignee, or
 to the person who has a right to receive them*, without prejudice to the provisions of
article 1738.

 Article 1737. The common carrier's duty to observe extraordinary diligence over the goods
remains in full force and effect even when they are temporarily unloaded or stored in
transit,
unless the shipper or owner has made use of the right of stoppage in transitu
 Article 1738. The extraordinary liability of the common carrier continues to be operative
even during the time the goods are stored in a warehouse of the carrier at the place of
destination, until the consignee has been advised of the arrival of the goods and has
had reasonable opportunity thereafter to remove them or otherwise dispose of them.

*Note in 71. Samar Case, the Court held that the stipulation in the Bill of Lading stating that the Carrier shall be the agent
of the Shipper from the point of discharger from ship to the actual port of destination is valid. The Carrier, as an
agent, is deemed to be a person who has right to receive the cargo. Thus extraordinary diligence ends.
Duration of Duty; Notice of Arrival
 Notice of Arrival and Release from Responsibility. – A
notice by the carrier of the arrival of the cargo to the shipper or
consignee, amounts to a constructive delivery of the cargo
which automatically releases the carrier of its extraordinary
responsibility in pursuance of Article 1736 of the Civil Code.

From that moment plaintiff [Consignee] could exercise over the

cargo ordinary control pertinent to ownership. It then became
the duty of plaintiff to unload forthwith the cargo to ascertain
the condition thereof, (Art. 1735) The plaintiff [Consignee]
cannot defer taking the goods by attending to other matters, no
matter how important they may be. 84. Rosario Farmers
Cooperative Marketing Corp v. MRR 3 CAR 437
Some Exemptions
 Natural Disaster & Due Diligence
Article 1739.
In order that the common carrier may be exempted from responsibility, the
natural disaster must have been the proximate and only cause of the loss.

However, the common carrier must exercise due diligence to prevent or minimize
loss
before, during and after the occurrence of flood, storm or other natural disaster
in order that the common carrier may be exempted from liability for the loss,
destruction, or deterioration of the goods.

The same duty is incumbent upon the common carrier in case of an act of the
public enemy referred to in article 1734, No. 2.

BUT
Article 1740. If the common carrier negligently incurs in delay in transporting
the goods, a natural disaster shall not free such carrier from responsibility.
 Damaged caused by
Character of Goods or Defects in Packing

 Article 1742. Even if the loss, destruction, or

deterioration of the goods should be caused by
the character of the goods, or the faulty nature
of the packing or of the containers, the
common carrier must exercise due diligence
to forestall or lessen the loss.
Contributory Negligence as Exemption
or Mitigation of Damages
Article 2179. When the plaintiff's own negligence was the
immediate and proximate cause of his injury, he cannot
recover damages.
But if his negligence was only contributory, the immediate
and proximate cause of the injury being the defendant's lack
of due care, the plaintiff may recover damages, but the
courts shall mitigate the damages to be awarded.

Article 1741. If the Shipper or Owner merely contributed

to the loss, destruction or deterioration of the goods,
the Proximate Cause thereof being the negligence of the
Common Carrier, the latter [Carrier] shall be liable in
damages, which however, shall be equitably reduced.
Shifting Burden of Proof: Proof of Accidents incumbent upon carrier;
Proof of Loss Arising through Negligence of Carrier incumbent upon Shipper occasioned by
Accidents ;

ARTICLE 361. The merchandise shall be transported at the risk and venture of the shipper,
if the contrary has not been expressly stipulated.

As a consequence, all the losses and deteriorations which the goods may suffer during the
transportation by reason of fortuitous event, force majeure, or the inherent nature and
defect of the goods, shall be for the account and risk of the shipper.
Proof of these accidents is incumbent upon the Carrier.

ARTICLE 362. Nevertheless, the carrier shall be liable for the losses and damages
resulting from the causes mentioned in the preceding article if it is proved, as
against him, that they arose through his negligence or by reason of his having failed to
take the precautions which usage has established among careful persons,
unless the shipper has committed fraud in the bill of lading, representing the goods to be of a kind
or quality different from what they really were.

 Explanation next slide

Shifting Burden of Proof: Proof of Accidents incumbent upon carrier;
Proof of Loss Arising through Negligence of Carrier incumbent upon Shipper
occasioned by Accidents ;

 Under the provisions of Article 361, the defendant-

carrier in order to free itself from liability, was only
obliged to prove that the damages suffered by the goods
were "by virtue of the nature or defect of the articles."

 Under the provisions of Article 362, the plaintiff, in

order to hold the defendant liable, was obliged to
prove that the damages to the goods by virtue of their
nature, occurred on account of the carrier-defendant’s
negligence or because it did not take the precaution
adopted by careful persons. (Government v. Ynchausti &
Co., 40 Phil. 219, 223). 79. Southern Lines Inc. v. Court of
Appeals & City of lloilo 4 SCRA 259
Delivery
How to Prove Delivery of Goods
 ARTICLE 353.
Par 2: After the contract has been complied with,
 the bill of lading which the carrier has issued shall be returned to him, and
by virtue of the exchange of this title with the thing transported, the respective
obligations and actions shall be considered cancelled,
 unless in the same act the claim which the parties may wish to reserve be reduced to writing, with
the exception of that provided for in Article 366. \

 Par 2: In case the consignee, upon receiving the goods, cannot return the bill of lading
subscribed by the carrier,

 because of its loss or of any other cause,

 he must give the latter [Carrier] a receipt for the goods delivered, this receipt
producing the same effects as the return of the bill of lading.
Carrier’s Liability in Case of Delay
ARTICLE 368. The carrier must deliver to the consignee, without
any delay or obstruction, the goods which he may have received,
by the mere fact of being named in the bill of lading to receive
them; and if he does not do so, he shall be liable for the
damages which may be caused thereby.

Consignee cannot delay taking of Goods; Reason. – Upon

notice by the carrier, the shipper or consignee cannot defer
taking the goods by attending to other matters, no matter
how important they may be, otherwise the continuance of the
extraordinary liability of the carrier would be dependent upon
causes of which it has no intervention and not of its own
making. 82. Republic v. Hijos de F. Escano Inc. 8 CAR 850
Package
What constitutes a package? Is it a container or
is it the cartons or crates?

The US Mitsui Test provides that the crates or the cartons [aka shipping units] should be
considered as packages, stating in this wise: [Paragraphs transposed]

 The individual crates or cartons prepared by the shipper and containing his goods
can rightly be considered 'packages' standing by themselves, they do not suddenly lose
that character upon being stowed in a carrier's container.

 The US Eurygenes Test qualifies the US Mitsui Test in this wise:

Although the cartons are to be treated, not the containers, as the COGSA packages.
However, Eurygenes indicated that a carrier could limit its liability to $500 per
container if the bill of lading failed to disclose the number of cartons or units within the
container, or if the parties indicated, in clear and unambiguous language, an agreement
to treat the container as the package." 60. Eastern Shipping Lines v. Court of Appeals 190
SCRA 564

[In short, the packages referred under COGSA pertain to the cartons provided the
number of cartons and containers are disclosed]
Limitation of Liabilities
Delay when Breach or Conversion.
 The general rule is that mere delay in the delivery of goods by a common carrier, no
matter how long continued, is not a conversion thereof, but is only a breach of the
contract of carriage.

Therefore, where a carrier fails to deliver goods within a reasonable time, although he
thereby makes himself liable for the damages incurred by reason of the delay, the
consignee cannot refuse to accept the goods from him and recover their value, but is
compelled to receive them.

 Exception: Where property in the hands of a common carrier is not delivered within a
reasonable time after it has reached its destination, the carrier, in the absence of any
legal exemption and after demand has been made and delivery refused, is liable
for a conversion of the property.

The consignee, under such circumstances, may elect to waive all title to the property
and sue for the conversion, and after he has done so, a, subsequent tender by the carrier
will not be available /or it as a defense. 76. Uy Chaco Sons & Co. v. Admiral Line 46 Phil
418
Degree less than Extraordinary
Diligence
 Article 1744. A stipulation between the common
carrier and the shipper or owner limiting the
liability of the former for the loss, destruction, or
deterioration of the goods to a degree less than
extraordinary diligence shall be valid, provided it
be:
1. In writing, signed by the shipper or owner;
2. Supported by a valuable consideration other than
the service rendered by the common carrier; and
3. Reasonable, just and not contrary to public policy
CAVEAT – Stipulation will not
operate if
 Article 1747. If the common carrier, without just
cause, delays the transportation of the goods or
changes the stipulated or usual route, the
contract limiting the common carrier's
liability cannot be availed of in case of the
loss, destruction, or deterioration of the goods.
Limitation of Liabilities in the Bills
of Lading
 See Arts. 1749-50

 What are the kinds of stipulations often made in the Bill of Lading concerning
the liability of the common carrier? Are these stipulations valid?

Three (3) kinds of stipulations have often been made in a bill of lading.
1. One exempting the carrier from any and all liability for loss or damage occasioned
by its own negligence.
2. One providing for an unqualified limitation of such liability to an agreed
valuation.
3. One limiting the liability of the carrier to an agreed valuation unless the shipper
declares a higher value and pays a higher rate of freight.

 According to an almost uniform weight of authority, the first and second kinds of
stipulations are invalid as being contrary to public policy, but the third is valid and
enforceable. 92.Heacock v. Macondray 42 Phil 205; 93.Freixas & Co. v. Pacific Mail S/S
Co. 42 Phil 198
Presumption of Negligence Still Applies

 Article 1752. Even when there is an agreement

limiting the liability of the common carrier in
the vigilance over the goods, the common
carrier is disputably presumed to have been
negligent in case of their loss, destruction or
deterioration
Limitation of Liability in COGSA
Sec. 4 (5) Neither the carrier nor the ship shall in any event be or become liable
for any loss or damage to or in connection with the transportation of goods in
an amount exceeding $600 per package lawful money of the United
States, or
in case of goods not shipped in packages, per customary freight unit, or the equivalent of that
sum in other currency,
unless the nature and value of such goods have been declared by the shipper
before shipment and inserted in the bill of lading. This declaration, if
embodied in the bill of lading, shall be prima facie evidence, but shall not be
conclusive on the carrier.

By agreement between the carrier, master, or agent of the carrier, and the shipper
another maximum amount than that mentioned in this paragraph may be fixed:
Provided, That such maximum shall not be less than the figure above named.
In no event shall the carrier be liable for more than the amount of damage
actually sustained.

Neither the carrier nor the ship shall be responsible in any event for loss or damage to
or in connection with the transportation of the goods if the nature or value thereof
has been knowingly and fraudulently misstated by the shipper in the bill of lading
Limitation of Liability in Airway Bill
 Article 22
1. In the carriage of persons the liability of the carrier for each passenger is limited to the
sum of two hundred and fifty thousand (250,000) francs.

2. In the carriage of registered baggage and of cargo, the liability of the carrier is limited to a sum of
two hundred and fifty francs (250,000) per kilogramme, unless the passenger or consignor has
made, at the time when the package was handed over to the carrier, a special declaration of
interest in delivery at destination and has paid a supplementary sum if the case so requires. In that
case the carrier will be liable to pay a sum not exceeding the declared sum, unless he proves that
that sum is greater than the passenger's or consignor's actual interest in delivery at destination.

3. As regards objects of which the passenger takes charge himself the liability of the carrier is limited to five
thousand (50,000) francs per passenger.
4. xxx
5. The sums mentioned in francs in this Article shall be deemed to refer to a currency unit consisting of
sixty-five and a half milligrammes of gold of millesimal fineness nine hundred. These sums may be
converted into national currencies in round figures. Conversion of the sums into national currencies
other than gold shall, in case of judicial proceedings, be made according to the gold value of such
currencies at the date of the judgment." (Amended by Hague Protocol, Article XI)

Limitation of Liability in Airway Bill
ARTICLE 23. Any provision tending to relieve the carrier of liability or to
fix a lower limit than that which is laid down in this convention shall be
null and avoid,
 but the nullity of any such provision shall not involve the nullity of the whole contract,
which shall remain subject to the provisions of this convention.

Paragraph 1 of this Article shall not apply to provisions governing loss or damage
resulting from the inherent defect, quality or vice of the cargo carried."
(Amended by Hague Protocol, Article XII)

Article 25 The limits of liability specified in Article 22 shall not apply

 if it is proved that the damage resulted from an act or omission of the carrier, his
servants or agents, done with intent to cause damage or recklessly and with
knowledge that damage would probably result;
 provided that, in the case of such act or omission of a servant or agent, it is also
proved that he was acting within the scope of his employment. (Amended by Hague
Protocol, Article XIII)
Limited Liability Doctrine in Maritime
Commerce
ARTICLE 587. The ship agent shall also be civilly
liable for the indemnities in favor of third
persons which may arise from the conduct of
the captain in the care of the goods which he
loaded on the vessel; but he may exempt
himself therefrom by abandoning the vessel
with all her equipments and the freight it
may have earned during the voyage.
Forfeiture
Sketchy Goods; Forfeiture
ARTICLE 357. If by reason of well-founded suspicion of falsity in the declaration as to the
contents of a package the carrier should decide to examine it, he shall proceed with his
investigation in the presence of witnesses, with the shipper or consignee in
attendance. (…)

Sec. 2530.Property Subject to Forfeiture Under Tariff and Customs Laws. — Any vessel
or aircraft, cargo, articles and other objects shall, under the following conditions, be
subject to forfeiture:

e.g. Illegal importation etc.

What if the carrier does not know? Still subject to forfeiture? Yes.

A ship found smuggling blue seal cigarettes is subject to forfeiture even if the owner thereof
claims he does not know such illegal use and even reported the vessels loss to the
Philippine Navy . 91.Comm. of Customs v. Court of Tax Appeals &Pascual 138 SCRA 581
Ship Owners and Ship Agents
Liabilities of Owner and Agent for
Acts of Captain
ARTICLE 586. [Par. 2] By ship agent is understood the person entrusted with provisioning or
representing the vessel in the port in which it may be found.

[Par. 1] The shipowner and the ship agent shall be civilly liable for the acts of the captain
and for the obligations contracted by the latter to repair, equip, and provision the
vessel, provided the creditor proves that the amount claimed was invested for the
benefit of the same.

ARTICLE 587. The ship agent shall also be civilly liable for the indemnities in favor of third
persons which may arise from the conduct of the captain in the care of the goods which
he loaded on the vessel;…

Not Liable when

ARTICLE 588. Neither the shipowner nor the ship agent shall be liable for the obligations
contracted by the captain, if the latter exceeds the powers and privileges pertaining to
him by reason of his position or conferred upon him by the former.
 Nevertheless, if the amounts claimed were invested for the benefit of the vessel, the
responsibility therefor shall devolve upon its owner or agent.
Liabilities of Co-owners and Part Owners

 ARTICLE 590. The co-owners of a vessel shall be civilly liable in

the proportion of their interests in the common fund, for the
results of the acts of the captain, referred to in Article 587. Each
co-owner may exempt himself from this liability by the
abandonment, before a notary, of the part of the vessel
belonging to him.

 ARTICLE 591. All the part owners shall be liable, in proportion

to their respective ownership, for the expenses for repairing the
vessel, and for other expenses which are incurred by virtue of a
resolution of the majority.
 They shall likewise be liable in the same proportion for the
expenses for the maintenance, equipment, and provisioning of
the vessel, necessary for navigation
Reason for the Rule
Primary liability is imposed on the ship
owner or carrier in recognition of the
universally accepted doctrine that the
shipmaster or captain is merely the
representative of the owner who has the
actual or constructive control over the
conduct of the voyage (Yeung Sheng Exchange
and Trading Co. v. Urrutia & Co., 12 Phil. 751
[1909
Charterer can be the Owner
 Fundamentally the word "naviero" must be
understood to refer to the person
undertaking the voyage, who in one case
may be the owner and in another the
charterer. 104. Standard Oil Co. of New York v.
Castelo 42 Phil 256; 20 OG 142
Art. 587 Not applicable When
 It must be stressed at this point that Article 587 speaks only of
situations where the fault or negligence is committed
solely by the captain. In cases where the shipowner is likewise
to be blamed, Article 587 does not apply (see Manila Steamship
Co., Inc. v. Abdulhanan, et al., 100 Phil. 32, 38).

 Such a situation will be covered by the provisions of the New

Civil Code on Common Carriers. Owing to the nature of their
business and for reasons of public policy, common carriers are
tasked to observe extraordinary diligence in the vigilance over
the goods and for the safety of its passengers (Article 1733, New
Civil Code). 108. Heirs of Amparo de los Santos v. Court of
Appeals 186 SCRA 649
Extent of Liability
 Under Article 587 of the Code of Commerce,
shipowner or agent has the right of
abandonment; and by necessary implication, his
liability is confined to that which he is entitled
as of right to abandon —“the vessel with all her
equipments and the freight it may have earned
during the voyage” (Yangco v. Laserna, et al., 73
Phil. 330, 332). 108. Heirs of Amparo de los
Santos v. Court of Appeals 186 SCRA 649
Captain or Master
Has Discretion
 . A captain commonly performs three (3) distinct roles:
(1) he is a general agent of the shipowner;
(2) he is also commander and technical director of the vessel  most
important; and
(3) he is a representative of the country under whose flag he navigates.

A ship’s captain must be accorded a reasonable measure of discretionary

authority to decide what the safety of the ship and of its crew and cargo
specifically requires on a stipulated ocean voyage.

It is the right and duty of the captain, in the exercise of sound discretion and in
good faith, to do all things with respect to the vessel and its equipment and
conduct of the voyage which are reasonably necessary for the protection and
preservation of the interests under his charge, whether those be of the
shipowners, charterers, cargo owners or of underwriters 111. Inter-Orient
Maritime Enterprises Inc. v. NLRC 235 SCRA 268 the captain delayed departure
to wait for repairs despite ship agent’s instructions to the contrary.
Extinctive Prescription
Default Rule in Civil Code
Article 1144. The following actions must be brought
within ten years from the time the right of action
accrues:
1. Upon a written contract;
2. Upon an obligation created by law;
3. Upon a judgment. (n)

Article 1148. The limitations of action mentioned in

articles... 1144 are without prejudice to those specified
in other parts of this Code, in the Code of Commerce,
and in special laws. (n)
Prescription under COGSA
Par. 4 Section 3(6)

In any event the carrier and the ship shall be discharged

from all liability in respect of loss or damage
unless suit is brought within one (1) year after:
1. delivery of the goods or
2. the date when the goods should have been delivered:

Provided, That if a notice of loss or damage, either apparent or

concealed, is not given as provided for in this section, that
fact shall not affect or prejudice the right of the shipper to
bring suit within [the said] one year
Prescription under COGSA
Who may file the notice of loss?
 The notice of loss or damage is required to be

filed not necessarily by the shipper also but also

by the consignee or any legal holder of the bill of
lading. 117. Chua Kuy v. Everett S/S Corp. 93 Phil
207
Prescription under COGSA
 Interruption of Prescriptive Period
Article 1155. The prescription of actions is interrupted when
they are filed before the court, when there is a written
extrajudicial demand by the creditors, and when there is
any written acknowledgment of the debt by the debtor.
(1973a)
 Should Art. 1155 of the Civil Code on Interruption of prescriptive period apply to
Sec. 3(6) of COGSA? (There are conflicting views)

No. It is desirable that matters affecting transportation of goods by sea be decided in as

short a time as possible; the application of the provisions of Article 1155 of the new Civil
Code would unnecessarily extend the period and permit delays in the settlement of
questions affecting transportation, contrary to the clear intent and purpose of the
law. 132. Dole Phils. Inc. v. Maritime co. of the Phils.148 SCRA 118 (1st Division, February
27, 1987)
Prescription under COGSA
What does loss or damage under Sec. 3(6) contemplate? What kinds of damage are excluded?

 Article 1189 par. 2, "loss" contemplates a situation where no delivery at all was
made by the shipper of the goods because the same had:
1. perished,
2. gone out of commerce, or
3. disappeared that their existence is unknown or they cannot be recovered.
118. Ang v. American S/S Agencies 19 SCRA 123

 Thus, it does not include a situation where there was indeed delivery — but
delivery to the wrong person, or a misdelivery.

Special Example: Where the goods allegedly lost was due to shipper’s own failure to load for shipment
such goods, the insurer of the carrier’s action for recovery of indemnity it paid to the carrier against
the unscrupulous shipper should not be based under COGSA’s prescriptive period but in the Civil
Code. The action prescribes in ten years from the time the right of action accrues 121.Sverigen
Angfartygs Assurans Forening v. Qua Chee Gan 105 Phil 473 Qua Chee Gan’s the same arsonist dude
in our insurance case.
Prescription under COGSA
 Damage under COGSA refers to whatever reduction there may have been in
the value of the goods is due to their deterioration or disappearance because
they had been damaged in transit. 119. Mitsui O.S.K. Lines v. Court of Appeals
287 SCRA 366

 If such damages were due, not to the deterioration and decay of the goods
while in transit, but to other causes independent of the condition of the cargo
upon arrival, like a drop in their market value, the prescriptive period under
COGSA does not apply. 120.Tan Liao v. American President Lines 98 Phil 203;
52 OG 763 rotten eggs case

 Thus, where the cargo of loungewear arrived in France late and worse only
until the “off season” in that country, prescriptive period should be based in
the Civil Code because what is in issue in this petition is not the liability of
the Carrier for its handling of goods as provided by §3(6) of the COGSA. 119.
Mitsui O.S.K. Lines v. Court of Appeals 287 SCRA 366
Prescription under COGSA
When should the one-year period run?
 In case of Delivery - The one-year period should be counted from the date the
goods were delivered to the arrastre operator and not from the date they were
delivered to Consignee’s job site. 130.New World Int'l Devt. Inc.v .NYK Fil-
Japan Shipping Corp. 656 SCRA 129 citing 124 Union Carbide; Reason for the
doctrine Section 3(6) adheres to the common-law rule that the duty imposed
water carriers was merely to transport from wharf to wharf and that the
carrier was not bound to deliver the goods at the warehouse of the consignee…

 In case of Non-delivery—If the carrier arrived at Manila on Day 1 and left it on

Day 10, it was on the latter date [the date of departure] that the carrier had the
last opportunity to deliver the goods. The period of one year within which the
carrier could be sued commenced to run therefore from the date of departure.
126. Rizal Surety & Ins. Co. v. Macondray 22 SCRA 902
Prescription under COGSA

May the carrier stipulate that it shall be relieved from liability if

the notice of loss or damage is filed beyond the stipulated
period less than the prescriptive period in COGSA? No.

Sec. 3 (8) of COGSA provides that:

(8) Any clause, covenant, or agreement in a contract of carriage relieving

the carrier or the ship from liability for loss or damage to or in
connection with the goods, arising from negligence, fault, or failure in
the duties and obligations provided in this section, or lessening such
liability otherwise than as provided in this Act, shall be null and
void and of no effect. A benefit of insurance in favor of the carrier, or
similar clause, shall be deemed to be a clause relieving the carrier
from liability.
Prescription under Warsaw
 Warsaw Convention
ARTICLE 29.
 The right to damages shall be extinguished if an action is not
brought within 2 years, reckoned from
 the date of arrival at the destination, or
 the date on which the aircraft ought to have arrived, or
 the date on which the transportation stopped.
 The method of calculating the period of limitation shall be
determined by the law of the court to which the case is submitted
 Application
 The Convention merely declares the carrier liable for damages in the enumerated cases, if
the conditions therein specified are present.
 For sure, it does not regulate the liability, much less exempt, the carrier for violating
the rights of others which must simply be respected in accordance with their contracts
of carriage. The application of the Convention must not therefore be construed to
preclude the operation of the Civil Code and other pertinent laws. 135. Luna v. Court of
Appeals 216 SCRA 107
Prescribing Period to File Claim
Filing of Claim as Condition
Precedent or Limitation
The filing of a claim with the carrier within the time limitation stipulated
actually constitutes a condition precedent to the accrual of a right of action
against a carrier for loss of or damage to the goods.

The shipper or consignee must allege and prove the fulfillment of the condition.

If it fails to do so, no right of action against the carrier can accrue in favor of the
former. 142. Federal Express Corp. v. American Home Assurance Co. 437 SCRA
50 cited in 143. Phil. Charter Ins.Corp.v. Chemoi) Lighterage Corp. 462 SCRA
77

The weight of authority sustains the view that such a stipulation is more in the
nature of a limitation upon the owner's right to recovery, and that the burden
of proof is accordingly on the carrier to show that the limitation is
reasonable and in proper form or within the time stated. 79. Southern
Lines Inc. v. Court of Appeals & City of lloilo 4 SCRA 259
Default Rule: Art 366
ARTICLE 366. Within the twenty-four (24) hours following the
receipt of the merchandise, the claim against the carrier for
damage or average be found therein upon opening the
packages, may be made, provided that the indications of the
damage or average which gives rise to the claim cannot be
ascertained from the outside part of such packages, in which
case the claim shall be admitted only at the time of receipt.

 After the periods mentioned have elapsed, or

 the transportation charges have been paid,

no claim shall be admitted against the carrier with regard to

the condition in which the goods transported were
delivered.
Art. 366
 Implicit Rule Under article 366 of the Code of Commerce,
claims for damages must be made at the time delivery is
taken, unless the indications of the damage cannot be
ascertained from the exterior of the packages, in which case
such claims must be made within twenty-four (24) hours after
delivery. 137. Govt of the Phil Islands v Inchausti 24 Phil 315

 Scope. Article 366 of the Code of Commerce applies to

maritime shipment. 138. Cordoba v. Warner Barnes 1 Phil 7 cited
in 137. Govt of the Phil Islands v Inchausti 24 Phil 315 Art 366
The provisions of the Code of Commerce applies to overland,
river and maritime transportation. 144.UCPB General Ins. Co. v.
Aboitiz Shipping Corp. 578 SCRA 25
Art. 366
Requisites Before Claim for Damages May be Demanded under Art.
366 . In order that the condition provided in Article 366 of the Code of
Commerce may be demanded there should be:
1. a consignment of goods, through a common carrier, by a consignor in
one place to a consignee in another place, and
2. the delivery of the merchandise by the carrier to the consignee at the
place of destination. 139. New Zealand Ins. Co. v. Adriana Choa Toy 97
Phil 646; 51 OG 5179

Applicable when. Notice of claim under Art. 366 of the Code of

Commerce applies only to cases for recovery of damages on
account of loss of or damage to cargo,
not to an action for refund of overpayment, and on the further consideration
the Code of Commerce provided any time limitation for suing for refund
of money paid in excess,
except only that it be filed within a reasonable time
Notice of Loss in COGSA
Section 3(6)
Unless notice of loss or damage and the general nature of such loss or damage
be given in writing to the carrier or his agent
at the port of discharge before or at the time of the removal of the goods into the
custody of the person entitled to delivery thereof under the contract of carriage,
 such removal shall be prima facie evidence of the delivery by the carrier
of the goods as described in the bill of lading.
 If the loss or damage is not apparent, the notice must be given within three
(3) days of the delivery.
 Said notice of loss or damage maybe endorsed upon the receipt for the
goods given by the person taking delivery thereof.
 The notice in writing need not be given if the state of the goods has at
the time of their receipt been the subject of joint survey or inspection.

[Note it does not bar filing of action within 1 year.]

Period to File Claim in Warsaw
Convention
 Article 26
1. Receipt by the person entitled to delivery of luggage or goods without complaint is prima facie
evidence that the same have been delivered in good condition and in accordance with the
document of carriage.
2. In the case of damage, the person entitled to delivery must complain to the carrier forthwith
after the discovery of the damage, and, at the latest,
 within seven (7) days from the date of receipt in the case of baggage and
 fourteen (14) days from the date of receipt in the case of cargo.
 In the case of delay the complaint must be made at the latest within twenty-one (21) days
from the date on which the baggage or cargo have been placed at his disposal. (as
amended by Hague Protocol Article XV)
3. Every complaint must be made in writing upon the document of carriage or by separate notice in
writing dispatched within the times aforesaid.
4. Failing complaint within the times aforesaid, no action shall lie against the carrier, save
in the case of fraud on his part.

Article 35
The expression "days" when used in this Convention means current days not working days.
The Charter Party
 Charter party, defined—American
jurisprudence defines charter party as a contract
by which an entire ship or some principal part
thereof is let by the owner to another person for
a specified time or use. Charter or charter
parties are of two kinds.

1. Charter of demise or bareboat; and

2. Contracts of affreightment. 150. Puromines,
Inc. v. Court of Appeals 220 SCRA 281
Demise or Bareboat
 Demise or bareboat charter party, defined. —Under the
demise or bareboat charter of the vessel, the charterer will
generally be considered as owner for the voyage or service
stipulated. The charterer mans the vessel with his own people
and becomes, in effect, the owner pro hac vice, subject to
liability to others for damages caused by negligence. 150.

 To create a demise the owner of a vessel must completely and

exclusively relinquish possession, command and navigation
thereof to the charterer; anything short of such a complete
transfer is a contract of affreightment (time or voyage
charter party) or not a charter party at all. 150.
Contract of Affreightment
 Contract of affreightment defined. On the other hand, a
contract of affreightment is one in which the owner of the vessel
leases part or all of its space to haul goods for others. It is a
contract for a special service to be rendered by the owner of the
vessel and under such contract the general owner retains the
possession command and navigation of the ship, the charterer or
freighter merely having use of the space in the vessel in return
for his payment of the charter hire.

 If the charter is a contract of affreightment, which leaves the

general owner in possession of the ship as owner for the voyage,
the rights, responsibilities of ownership rest on the owner and
the charterer is usually free from liability to third persons in
respect of the ship. 150. [Read with Art. 587]
Basis Determining Responsibility to
3rd Persons is Control of the Vessel
 In sum, responsibility to third persons for goods shipped
on board a vessel follows the vessel's possession and
employment; and if possession is transferred to the charterer
by virtue of a demise, the charterer, and not the owner, is liable
as carrier “on the contract of affreightment” made by himself or
by the master with third persons, and is answerable for loss,
damage or nondelivery of goods received for transportation.

 [While] An owner who retains possession of the ship, though

the hold is the property of the charterer, remains liable as
carrier and must answer for any breach of duty as to the care,
loading or unloading of the cargo150.
Types of Contract of Affreightment

 A time charter is a contract for the use of a vessel for a specified period
of time or for the duration of one or more specified voyages. However,
the owner of a time-chartered vessel (unlike the owner of a vessel
under a demise or bareboat charter), retains possession and control
through the master and crew who remain his employees. What the
time charterer acquires is the right to utilize the carrying capacity and
facilities of the vessel and to designate her destinations during the
term of the charter.

 Voyage charter, or trip charter, is simply a contract of affreightment,

that is, a contract for the carriage of goods, from one or more ports of
loading to one or more ports of unloading, on one or on a series of
voyages. In a voyage charter, master and crew remain in the employ of
the owner of the vessel. 154. Litonjua Shipping Co. v. National
Seamen's Board 176 SCRA 189
Effect of Failure to Disclose Real
Charterer
 Article 652 of the Code of Commerce provides that
the charter party shall contain, among others, the
name, surname, and domicile of the charterer, and
if he states that he is acting by commission, that of
the person for whose account he makes the contract.

 Such failure to disclose renders the true charterers a

stranger to the transaction. Art. 1883 provides that
if an agent acts in his own name, the principal has
no right of action against the persons with whom
the agent has contracted. 152.Marimperio Cia.
Naviera S.A. v. Court of Appeals 156 SCRA 368
Rescission

Extrajudicial rescission of charter valid whenA judicial

action for the rescission of a contract is not necessary where the
contract provides that it may be revoked and cancelled for
violation of any of its terms and conditions Palay, Inc. v. Clave,
124 SCRA 638 [1983]). 152.Marimperio Cia. Naviera S.A. v. Court
of Appeals 156 SCRA 368

Partial Performance; Compensation. —Where after the

commencement of the execution of a contract of affreightment
the charterer waives further performance and the owner
consents to the rescission of the contract, the latter is
nevertheless entitled to compensation for the expenses incurred
in the partial performance of the agreement. 160. Hivav.Phil
Trading Co 4 Phil 74
Vessel
What constitutes a Vessel
Only vessels engaged in what is ordinarily known as maritime commerce are within the
provisions of law conferring limited liability on the owner in case of maritime disaster. The
US Court observed that the word "vessel" in these codes is limited to ships and other sea-going
vessels. "Its provisions are not applicable," said the court, "to vessels in inland navigation, which are
especially designated by the name of boats." 165. Lopez v. Duruelo 52 Phil 229

What Vessel is covered under COGSA?

 Sec. 1(d) The term "ship" means any vessel used for the carriage of goods by sea.

What Vessel is covered under the Marina Charter? Sec. 3 (b) of PD 474 Creating the Marina provides
that "Vessels" or "Watercraft" —
Any barge, lighter, bulk carrier, passenger ship freighter, tanker, container ship, fishing boats or other artificial
contrivance utilizing any source of motive power, designed, used or capable of being used as a means of water
transportation operating either as common contract carrier, including fishing vessels covered under Presidential
Decree No. 43, except
1. those owned and/or operated by the Armed Forces of the Philippines and by foreign governments for military
purposes, and
2. bancas, sailboats and other waterborne contrivance of less than three (3) gross tons capacity and not motorized.
Registration
The requisite of registration in the registry, of the
purchase of a vessel, is necessary and
indispensable in order that the purchaser's
rights may be maintained against a claim filed
by a third person. 168. Rubiso v. Rivera 37 Phil 72
Acquisitive Prescription
 ARTICLE 573. Merchant vessels constitute property which may be
acquired and transferred by any of the means recognized by law. The
acquisition of a vessel must appear in a written instrument, which
shall not produce any effect with respect to third persons if not
inscribed in the registry of vessels.

The ownership of a vessel shall likewise be acquired by possession in

good faith, continued for three years, with a just title duly recorded.

In the absence of any of these requisites, continuous possession for ten

(10) years shall be necessary in order to acquire ownership.

A captain may not acquire by prescription the vessel of which he is in

command.
Right of Redemption
ARTICLE 575. Co-owners of vessels shall have the
right of repurchase and redemption in sales
made to strangers, but they may exercise the
same only within the nine (9) days following the
inscription of the sale in the registry, and by
depositing the price at the same time.
Freight
Freight in General; Ship Owner’s
Lien
Freightage may be claimed by the shipowner direct from
the shipper. It need not be prepaid, because the
shipowner may retain the cargo at the port of
destination, until freightage is paid159. Plumelet v.
Morales Shipping Co. Inc. 97 Phil 750

Nature: Carrier has such a lien only while it retains

possession of the goods, so that delivery of the goods to
the consignee or a third person terminates, or
constitutes a waiver of, the lien. The lien of a carrier for
the payment of freight charges is nothing more than the
right to withhold the goods, and is inseparably
associated with its possession and dependent upon it
Deadfreight.
 Under the law, the cargo not loaded is
considered as deadfreight. It is the amount paid
by or recoverable from a charterer of a ship for
the portion of the ship’s capacity the latter
contracted for but failed to occupy. Article 680
explicitly states that the liability for deadfreight
is on the charterer
Demurrage
Definition
 Demurrage. Demurrage is the sum fixed in a charter party as a
remuneration to the owner of the ship for the detention of his
vessel beyond the number of days allowed by the charter
party for loading or unloading or for sailing. 164. National Food
Authority v. Court of Appeals 311 SCRA 700

 .In a broad sense, every improper detention of a vessel may be

considered a demurrage. Using the term in [its broader sense,
damages in the] nature of demurrage are recoverable for a
breach of the implied obligation to load or unload the cargo
with reasonable dispatch 49. Magellan Manufacturing
Marketing Corp. v. Court of Appeals 162. Telengtan Bros. & Sons
Inc. v. Court of Appeals 236 SCRA 617
Who May Demand Demurrage
While the right to demand demurrage is vested in
the captain the vessel, the said right may very
well be exercised by the shipowner which is the
principal of the captain. 164. National Food
Authority v. Court of Appeals 311 SCRA 700
MORTGAGE PD 1521
PD 1521

Section 2. Who may Constitute a Ship Mortgage.

Any citizen of the Philippines, or any association or corporation
organized under the laws of the Philippines, at least sixty per cent of
the capital of which is owned by citizens of the Philippines may,
for the purpose of financing the construction, acquisition, purchase of
vessels or initial operation of vessels,
freely constitute a mortgage or any other lien or encumbrance on his or
its vessels and its equipment with any bank or other financial
institutions, domestic or foreign.

Purpose Requisite A mortgage constituted for the purpose mentioned

under this section may be characterized as a preferred mortgage. 173.
Poliand Industrial Ltd. V. NDC 467 SCRA 500
Section 10. Lien of preferred Mortgage; foreclosure;
jurisdiction; procedure

 A preferred mortgage shall constitute a lien

 upon the mortgaged vessel
 in the amount of the outstanding mortgage indebtedness secured by such vessel.
 Upon the default of any term or condition of the mortgage
 such lien may be enforced by the mortgagee by suit in remaining admiralty, wherein the vessel itself may be
made a partly defendant and be arrested in the manner as provided in Section 11 hereof.
 Original jurisdiction of all such suits is granted to the Court of First Instance of the Philippines exclusively.
 In addition to any notice by publication, actual notice of commencement of any such suit shall direct, to (1)
the master, other ranking officer, or caretaker of the vessel, and (2) any person who has recorded a notice of
claim of an undischarged lien upon the vessel, as provided in Section 7 hereof, unless after search by the
mortgage satisfactory to the court, such mortgagor, master, other ranking officer, caretaker, or claimant is not
found within the Philippines. Failure to give notice to any such person, as required by this Section, shall
be liable to such person for damages in the amount of his interest in the vessel terminated by the suit.

 In case of judicial foreclosure as provided herein, the provisions of Rule 68 of the New Rules of
Court, if not inconsistent herewith, shall apply.

 The lien of a preferred ship mortgage may also be enforced by a suit in rem in admiralty or otherwise
in any foreign country in which the vessel may be found pursuant to the procedure of said country
for the enforcement of ship mortgages constituting maritime liens on vessels documented under the
laws of said country.
Sec 18. Suit in Personam in Admiralty on Default

1. Upon the default of any term or condition of a preferred

mortgage upon a vessel, the mortgagee may, in addition to all
other remedies granted by this Decree, bring suit in personal
in admiralty in a district court of the Philippines, against the
mortgagor for the amount of the outstanding mortgage
indebtedness secured by such vessel or any deficiency in
the full payment thereof.
2.

3. This Decree shall not be construed, in the case of a mortgage

covering, in addition to vessels, realty or personality other
than vessels, or both, to authorize the enforcement by suit in
rem in admiralty of the rights of the mortgage in respect to
such realty or personality other than vessels
General Rule
Upon enforcement of the preferred mortgage and
eventual foreclosure of the vessel, the proceeds
of the sale shall be first applied to the claim of
the mortgage creditor unless there are superior
or preferential liens, as enumerated under
Section 17. 173. Poliand Industrial Ltd. V. NDC
467 SCRA 500
Section 17. Preferred Maritime Lien, Priorities, Other Liens

 Par. 2 The preferred mortgage lien shall have priority over all
claims against the vessel, except the following claims in the
order stated:
(1) expenses and fees allowed and costs taxed by the court and
taxes due to the Government;
(2) crew's wages;
(3) general average;
(4) salvage; including contract salvage;
(5) maritime liens arising prior in time to the recording of the
preferred mortgage;
(6) damages arising out of tort; and
(7) preferred mortgage registered prior in time. [GCASPTPr]
Section 17. Preferred Maritime Lien, Priorities, Other Liens

Upon the sale of any mortgaged vessel in any extra-judicial sale or by order of a
district court of the Philippines in any suit in rem in admiralty for the
enforcement of a preferred mortgage lien thereon, all pre-existing claims in
the vessel, including any possessory common-law lien of which a lien or is
deprived under the provisions of Section 16 of this Decree, shall be held
terminated and shall thereafter attach in like amount and in
accordance with the priorities established herein to the proceeds of the
sale.

 If the proceeds of the sale should not be sufficient to pay all creditors
included in one number or grade, the residue shall be divided among them
pro rata. All credits not paid, whether fully or partially shall subsist as
ordinary credits enforceable by personal action against the debtor. The record
of judicial sale or sale by public auction shall be recorded in the Record of
Transfers and Encumbrances of Vessels in the port of documentation.
Maritime Lien
Section 21. Maritime Lien for Necessaries; persons entitled to such lien Any person furnishing repairs, supplies,
towage, use of dry dock or marine railway, or other necessaries to any vessel, whether foreign or domestic,
upon the order of the owner of such vessel, or of a person authorized by the owner, shall have a maritime
lien on the vessel, which may be enforced by suit in rem, and it shall be necessary to allege or prove that
credit was given to the vessel.

 Under P.D. No. 1521 or the Ship Mortgage Decree of 1978, the following
are the requisites for maritime liens on necessaries to exist:
 the “necessaries” must have been furnished to and for the benefit of the
vessel;
 the “necessaries” must have been necessary for the continuation of the
voyage of the vessel;
 the credit must have been extended to the vessel;
 there must be necessity for the extension of the credit; and
 the necessaries must be ordered by persons authorized to contract on
behalf of the vessel. 172. Crescent Petroleum Ltd. V. MA/ "LokMaheshwari
474 SCRA 623
Section 22. Persons Authorized to Procure Repairs,
Supplies, and Necessaries

 The following persons shall be presumed to have

authority from the owner
 to procure repairs, supplies, towage, use of dry dock or
marine railway, and other necessaries for the vessel:
1. The managing owner,
2. ship's husband,
3. master or
4. any person to whom the management of the vessel at
the port of supply is entrusted.
No person tortuously or unlawfully in possession or
charge of a vessel shall have authority to bind the
vessel.
LOAN ON BOTTOMRY
OR RESPONDENTIA
Defintion
ARTICLE 719.
A loan in which the repayment of the sum loaned
and of the premium stipulated depends upon
 the safe arrival in port of the goods on which it
is made, or
 of the price they may receive in case of accident,

shall be considered a loan on bottomry (vessel) or

respondentia (cargo)
 ARTICLE 361. The merchandise shall be transported at the risk and venture of the
shipper, if the contrary has not been expressly stipulated.
 As a consequence, all the losses and deteriorations which the goods may suffer during
the transportation by reason of fortuitous event, force majeure, or the inherent nature
and defect of the goods, shall be for the account and risk of the shipper.
 Proof of these accidents is incumbent upon the carrier.
 ARTICLE 362. Nevertheless, the carrier shall be liable for the losses and damages
resulting from the causes mentioned in the preceding article if it is proved, as against
him, that they arose through his negligence or by reason of his having failed to take the
precautions which usage has established among careful persons, unless the shipper has
committed fraud in the bill of lading, representing the goods to be of a kind or quality
different from what they really were.
 If, notwithstanding the precautions referred to in this article, the goods transported run
the risk of being lost, on account of their nature or by reason of unavoidable accident,
there being no time for their owners to dispose of them, the carrier may proceed to sell
them, placing them for this purpose at the disposal of the judicial authority or of the
officials designated by special provisions.