Transportation.pdf

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TRANSPORTATION LAW

MERCANTILE LAW

MERCANTILE LAW

TRANSPORTATION LAW

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I. Common Carriers

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Common carriers are:

(Reference is to the Civil Code, unless otherwise indicated)

(1) Persons, corporations, associations;

firms

or

(2) Engaged in the business of carrying or transporting;

A. CONCEPT

(3) Passengers or goods or both;

A contract of transportation is one whereby a certain person or association of persons obligate themselves to transport persons, things, or news from one to another for a fixed price.

(4) By land, water, or air;

Parties to the contract:

Art. 1732 makes no distinction:

(1) Shipper - one who gives rise to the contract of transportation by agreeing to deliver the things or news to be transported, or to present his own person or those of other or others in the case of transportation of passengers.

(1) Between one whose principal business activity is the carrying of persons or goods or both, and one who does such carrying only as an ancillary activity [Fabre v. CA (1996)];

(2) Carrier or conductor - one who binds himself to transport person, things, or news, as the case may be, or one employed in or engaged in the business of carrying good for others for hire. (3) Consignee - the party to whom the carrier is to deliver the things being transported; to whom the carrier may lawfully make delivery in accordance with its contract of carriage. The shipper and the consignee may be the same person. Carriers are persons or corporations who undertake to transport or convey goods, property or persons, from one place to another, gratuitously or for hire, and are classified as: (1) Private or special carriers, who transport or undertake to transport in a particular instance for hire or reward [Agbayani, Commercial Laws of the Philippines (1987)]; and (2) Common or public carriers, defined in Art. 1732.

(5) For compensation; (6) Offering their services to the public [Art. 1732].

(2) Between a person or enterprise offering transportation service on a regular or scheduled basis and one offering such service on an occasional, episodic, or unscheduled basis [Loadstar Shipping Co., Inc. v. CA (1999)]; (3) Between a carrier offering its services to the general public and one who offers services or solicits business only from a narrow segment of the general population [De Guzman v. CA (1988)]. The true test for a common carrier is not the quantity or extent of the business actually transacted, or the number and character of the conveyances used in the activity, but whether the undertaking is a part of the activity engaged in by the carrier that he has held out to the general public as his business or occupation. If the undertaking is a single transaction, 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. The question must be determined by the character of the business actually carried on by the carrier, not by any secret intention or mental reservation it may entertain or assert when charged with the

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duties and obligations that the law imposes [Teodoro v. Nicolas (2012)]. A common carrier need not have fixed and publicly known routes. Neither does it have to maintain terminals or issue tickets [Asia Lighterage and Shipping v. CA (2003)]. One engaged in the business of transporting petroleum products from refineries via pipeline is a common carrier. It is engaged in the business of transporting or carrying goods, i.e., petroleum products, for hire as a public employment. It undertakes to carry for all persons indifferently, that is, to all persons who choose to employ its services, and transports the goods by land and for compensation. The fact that it has a limited clientele does not exclude it from the definition of a common carrier [First Phil. Industrial v. CA (1998)]. A travel agency is not a common carrier. It is not an entity engaged in the business of transporting either passengers or goods and is therefore neither a private nor a common carrier. Its covenant with its customers is simply to make travel arrangements on their behalf [Crisostomo v. CA (2003)].

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Common carrier

Private carrier

Governing law Civil Code; Code of Commerce and special laws, if not regulated by the Civil Code (Art. 1766); law of the country to which the goods are to be transported, if regarding liability for loss, destruction, or deterioration of goods

Law on obligations and contracts

Regulation A public service, therefore subject to provisions governing common carriers and public utilities.

Not subject to regulation as a common carrier

It is not necessary that the carrier be issued a certificate of public convenience [Loadstar Shipping Co., Inc. v. CA (1999)]. Kabit system:

Common carrier

Private carrier

(1) It is an arrangement whereby a person who has been granted a certificate of convenience allows another person who owns motor vehicles to operate under such franchise for a fee [Lita Enterprises, Inc. v. IAC (1984)].

Availability Holds himself out in common, that is, to all persons who choose to employ him, as ready to carry for hire

Agrees in some special case with some private individual to carry for hire

Binding effect Bound to carry all who offer and tender reasonable compensation for carrying them

Not bound to carry for any reason, such goods as it is accustomed to carry, unless it enters into a special agreement to do so

Diligence required Extraordinary

Ordinary

(2) It is invariably recognized as being contrary to public policy and therefore void and inexistent under Art. 1409. Thus, for the safety of passengers and the public, the registered owner of the vehicle is not allowed to prove that another person has become the owner so that he may be thereby relieved of responsibility [Lim v. CA (2002)]. (3) One of the primary factors considered in the granting of a certificate of public convenience for the business of public transportation is the financial capacity

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of the holder of the license, so that liabilities arising from accidents may be duly compensated. The kabit system renders illusory such purpose and, worse, may still be availed of by the grantee to escape civil liability caused by a negligent use of a vehicle owned by another and operated under his license. [Dizon v. Octavio (1955)]. (4) However, one who has availed of the kabit system is not precluded from filing for damages against another who caused the injury, as the policy against the kabit system will not be defeated by giving such person standing to sue. [Lim v CA (2002)] Uber/Grab: Transport Network Company or TNC is defined as an organization whether a corporation, partnership, or sole proprietorship, that provides pre-arranged transportation services for compensation using an internet-based technology application or a digital platform technology to connect passengers with drivers using their personal vehicles [DOTC D.O. No. 2015-011]. e.g. Uber and Grab. The TNC may or may not have been granted a Certificate of Public Convenience (CPC). If it is a holder of a valid and current CPC, it is known as a common carrier. Otherwise, it is classified as a land transportation service contractor. The Partners (owners of the vehicles used in transporting passengers) forming part of the network of a TNC, may or may not be a common carrier, depending on whether the Partner(s) itself/themselves are holders of a CPC. A mere Accreditation given by LTFRB is not an equivalent to a CPC and will not make said holder a common carrier. If the Partner is a holder of a CPC, said Partner is a common carrier. However, if the Partner is not a holder of a CPC, said Partner is merely a land transportation service contractor [BIR RMC 70-2015].

MERCANTILE LAW

Note: Please be guided requirements under Art. 1732.

by

the

B. DILIGENCE REQUIRED B.1. STANDARD OF DILIGENCE Common carriers, from the nature of their business and for reasons of public policy, are bound to observe extraordinary diligence, according to all the circumstances of each case: (1) In the vigilance over the goods; and (2) For the safety of the passengers transported by them [Art. 1733]. Extraordinary diligence in the vigilance over the goods is expressed in Arts 1734, 1735, and 1745, Nos. 5, 6, and 7, while the extraordinary diligence for the safety of the passengers is further set forth in Art.s 1755 and 1756. As stated in Art. 1733, extraordinary diligence is required because of the (1) nature of the business of common carriers and (2) for reasons of public policy. Extraordinary diligence: (1) Requires rendering service with the greatest skill and utmost foresight [Agbayani (1987)]; (2) Requires carrying passengers safely as far as human care and foresight can provide, using the utmost diligence of very cautious persons, with a due regard for all the circumstances [Art. 1755]; (3) Does not require common carriers to exercise all the care, skill, and diligence of which the human mind can conceive, nor such as will free the transportation of passengers from all possible perils. Note: A common carrier is not an insurer of the safety of its passengers and is not bound absolutely and at all events to carry them safely and without injury [Yobido v. CA (1997)].

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B.2. PRESUMPTION OF NEGLIGENCE The mere proof of delivery of goods in good order to a carrier, and of their arrival at the place of destination in bad order, makes out a prima facie case against the carrier, so that if no explanation is given as to how the injury occurred, the carrier must be held responsible. It is incumbent upon the carrier to prove that the loss was due to accident or some other circumstance inconsistent with its liability [Ynchausti Steamship v. Dexter and Unson (1920)]. Note: While delay in the delivery of goods is a breach of contract of carriage, it does not raise the presumption of negligence because the goods are not lost, deteriorated, or destroyed [see Art. 1735]. In case of death of or injuries to passengers, common carriers are presumed to have been at fault or to have acted negligently, unless they prove that they observed extraordinary diligence as prescribed in Arts 1733 and 1755 [Art. 1756]. Note: Mere failure to reach one’s destination, without injury or death, does not raise the presumption of negligence because it does not involve safety of the passengers.

MERCANTILE LAW

II. Vigilance over Goods A. LIABILITY, IN GENERAL The law of the country to which the goods are to be transported shall govern the liability of the common carrier for their loss, destruction or deterioration [Art. 1753]. Under Philippine law, the liability of the common carrier with respect to vigilance over goods, in general, are as follows: (1) Common carriers are responsible for the loss, destruction, or deterioration of the goods [Art. 1734]. In fact, they are liable even in those cases where the cause of the loss or damage is unknown [Agbayani (1987)]. (2) Moreover, if the goods are lost, destroyed, or deteriorated, common carriers are presumed to have been at fault or to have acted negligently [Art. 1735]. Note: Two-pronged determining liability:

analysis

in

(1) Whether or not the cause of the loss, destruction, or deterioration is included under Art. 1734;

C. LIABILITIES The obligation of the common carrier consists in the transportation of passengers or goods or both [Art. 1732].

(2) If not, whether or not the common carrier exercised extraordinary diligence.

The liabilities of a common carrier arises from a contract of carriage. Thus, the cause of action, when there is failure on its part to exert extraordinary diligence according to all circumstances, is for breach of contract [Isaac v. A.L. Ammen (1957)].

B. EXEMPTING CAUSES

In what follows, these liabilities in case of breach, both with respect to vigilance over the goods and safety of the passengers transported, will be discussed.

Exception: The same is due to any of the following causes only:

General Rule: Common carriers are responsible for the loss, destruction, or deterioration of the goods

(1) Flood, storm, earthquake, lightning, or other natural disaster or calamity; (2) Act of the public enemy in war, whether international or civil;

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(3) Act of omission of the shipper or owner of the goods; (4) The character of the goods or defects in the packing or in the containers; (5) Order or act of competent public authority [Art. 1734]. In all other cases of loss, destruction, or deterioration, the common carrier is presumed to have been at fault or to have acted negligently, unless they prove that they observed extraordinary diligence [Art. 1735]. Thus, in De Guzman v. CA (1988), it was held that hijacking, not being included in Art. 1734, must be dealt with under the provisions of Art. 1735, and thus, the common carrier is presumed to have been at fault or negligent.

MERCANTILE LAW

occurrence of the natural disaster, for it to be exempt from liability under the law for the loss of the goods [Art. 1739]. Fire may not be considered a natural disaster or calamity. This must be so as it arises almost invariably from some act of man or by human means. It does not fall within the category of an act of God unless caused by lightning or by other natural disaster or calamity. It may even be caused by the actual fault or privity of the carrier [Eastern Shipping Lines v. IAC (1987)]. Note: If the common carrier negligently incurs in delay in transporting the goods, a natural disaster shall not free such carrier from responsibility [Art. 1740]. B.2. ACT OF PUBLIC ENEMY Requisites:

B.1. NATURAL DISASTER OR CALAMITY Requisites: (1) The natural disaster must have been the proximate and only cause of the loss; (2) The common carrier must exercise due diligence to prevent or minimize the loss before, during and after the occurrence of the flood, storm or natural disaster [Art. 1739]; (3) The common carrier must not have negligently incurred delay [Art. 1740]; In order that a common carrier may be absolved from liability where the loss, destruction or deterioration of the goods is due to a natural disaster or calamity, it must be shown that such natural disaster or calamity was the proximate and only cause of the loss; there must be an entire exclusion of human agency from the cause of the injury of the loss [Philippine American General Insurance Co., Inc. v. MGG Marine Services, Inc. (2002)]. Moreover, even in cases where a natural disaster is the proximate and only cause of the loss, a common carrier is still required to exercise due diligence to prevent or minimize loss before, during and after the

(1) The act of the public enemy was committed either in an international or civil war [Art. 1734]; (2) The act of the public enemy must have been the proximate and only cause; (3) The common carrier must exercise due diligence to prevent or minimize the loss before, during and after the act of the public enemy causing the loss, destruction or deterioration of the goods [Art. 1739]. B.3. ACT OR OMISSION OF SHIPPER OR OWNER The act or omission of the shipper must have been the proximate and only cause of the loss, destruction, or deterioration of the goods. If the shipper or owner merely contributed to the loss, destruction or deterioration of the goods, the proximate cause being the negligence of the common carrier, the latter shall be liable for the damages, which shall, however, be equitably reduced [Art. 1741].

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B.4. CHARACTER OF THE GOODS

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A fortuitous event has the following characteristics:

Requisites: (1) The loss, destruction, or deterioration of the goods is due to the character of the goods or defects in the packing or in the containers [Art. 1739]; (2) The common carrier must exercise due diligence to forestall or lessen the loss [Art. 1741]. If the fact of improper packing is known to the carrier or its servants or apparent upon ordinary observation, but it accepts the goods notwithstanding such condition, it is not relieved of liability for loss or injury resulting therefrom [Southern Lines v. CA (1962)]. B.5. ORDER OF COMPETENT AUTHORITY Requisites: (1) There must be an order or act of competent public authority through which the goods are seized or destroyed [Art. 1734]; (2) The said public authority must have had the power to issue the order [Art. 1743]. The intervention of the municipal officials was not of a character that would render impossible the fulfillment by the carrier of the obligation. A carrier is not duty bound to obey an illegal order (of a mayor) to dump into the sea the scrap iron. There is absence of sufficient proof that the issuance of the order was attended with such force or intimidation as to completely overpower the will of the carrier’s employees [Ganzon v. CA (1988)). B.6. FORCE MAJEURE Force majeure – in general, has also been invoked as an exempting cause based on Art. 1174, which states that no person shall be responsible for a fortuitous event which could not be foreseen, or which, though foreseen, was inevitable.

(1) The cause of the unforeseen and unexpected occurrence, or the failure of the debtor to comply with his obligations, must be independent of human will; (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. There must be an entire exclusion of human agency from the cause of injury or loss. Moreover, a common carrier may not be absolved from liability in case of force majeure or fortuitous event alone. The common carrier must still prove that it was not negligent in causing the death or injury resulting from an accident [Yobido v. CA (1997)]. Loss of a ship and of its cargo, in a wreck due to accident or force majeure must, as a general rule, fall upon their respective owners, except in cases where the wrecking or stranding of the vessel occurred through the malice, carelessness, or lack of skill on the part of the captain or because the vessel put to sea is insufficiently repaired and prepared. In order that the exemption due to force majeure would apply, the carrier must prove that the loss or destruction of the merchandise was due to accident and force majeure and not to fraud, fault, or negligence on the part of the captain or owner of the ship [Tan Chiong Sian v. Inchausti (1912)].

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C. CONTRIBUTORY NEGLIGENCE The liability of the common carrier shall be equitably reduced when the loss, destruction, or deterioration of the goods when: (1) The negligence of the common carrier was the proximate cause thereof; and (2) The shipper or owner merely contributed to such loss, destruction, or deterioration [Art. 1741].

D. DURATION OF EXTRAORDINARY RESPONSIB ILITY FOR GOODS The responsibility to exercise extraordinary diligence begins from the time the goods are unconditionally placed in the possession of and received by the carrier for transportation [Art. 1736]. The carrier’s responsibility terminates in any of the following cases: (1) When the goods are delivered actually or constructively by the carrier to the consignee or to the person who has a right to receive them [Art. 1736]; (2) When the goods are temporarily unloaded or stored in transit by reason of the exercise of the shipper or owner of his right of stoppage in transitu; (3) When the consignee has been advised of the arrival of the goods at the place of destination and has had reasonable opportunity to remove them or dispose of them from the warehouse of the carrier at the place of destination [Art. 1738]. In dealing with the contract of common carriage of passengers, for purpose of accuracy, there are two (2) aspects of the same, namely: (a) contract ‘to carry (at some future time),’ which contract is consensual and is necessarily perfected by mere consent; and (b) contract ‘of carriage’ or ‘of common carriage,’ which should be considered as a real contract for not until the carrier is

MERCANTILE LAW

actually used can the carrier be said to have already assumed the obligation of a carrier [Paras, Civil Code Annotated, 11th Ed]. Note: The distinction is important in determining when the common carrier is required to exercise extraordinary responsibility. The birth of the contract is not necessarily the birth of the duty to exercise extraordinary responsibility. D.1. DELIVERY OF GOODS TO COMMON CARRIERS Under Art. 1736, delivery means unconditionally placing the goods in the possession of the carrier and the carrier receiving them for transportation. Thus, if the common carrier received the goods not for transportation but only for safekeeping, then the duty of extraordinary diligence has not yet started. Unconditionally placing the goods in the possession of the carrier means the shipper cannot get them back from the common carrier at will. The liability of the carrier as common carrier begins with the actual delivery of the goods for transportation and not merely with the formal execution of a receipt or bill of lading; the issuance of a bill of lading is not necessary to complete delivery and acceptance. Even where it is provided by statute that liability commences with the issuance of the bill of lading actual delivery and acceptance are sufficient to bind the carrier [Cia. Maritima v. Ins. Co. of North America (1964)]. D.2. ACTUAL/CONSTRUCTIVE DELIVERY The extraordinary responsibility of the common carrier ends when, subject to Art. 1738, the goods are delivered actually or constructively by the carrier to: (1) The consignee; or (2) The person who has a right to receive them (Art. 1736), such as agents, brokers, and the like.

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Art. 1738 provides that 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: (1) Been advised of the arrival of the goods; and (2) Had reasonable opportunity thereafter to remove them or otherwise dispose of them. Delivery of the cargo to the customs authorities is not delivery to the consignee or “to the person who has a right to receive them” as contemplated in Art. 1736 because in such case the goods are still in the hands of the government and the owner cannot exercise dominion over them. However, the parties may agree to limit the liability of the carrier considering that the goods still have to go through the inspection of the customs authorities before they are actually turned over to the consignee. This stipulation is not contrary to morals or public policy. This is a situation where it may be said that the carrier loses control of the goods because of a custom regulation and it is unfair that it be made responsible for what may happen during the interregnum [Lu Do v. Binamira (1957)]. D.3. TEMPORARY STORAGE

UNLOADING

OR

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 [Art. 1737]. General rule: Extraordinary diligence over the goods remains even when the goods are temporarily unloaded or stored in transit. Exception: The duty to observe such diligence ceases when shipper or owner made use of the right of stoppage in transitu.

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Stoppage in transitu is the act by which the unpaid vendor of goods stops their progress and resumes possession of them constructively while they are in the course of transit from him to the purchaser, and not yet actually delivered to the latter [Agbayani (1987)]. Basis: Under Art. 1530, when the buyer of the goods becomes insolvent, the unpaid seller who has parted with the possession of the goods at any time while they are in transit, may resume the possession of the goods as he would have had if he had never parted with the possession. When the right of stoppage in transitu is exercised, the common carrier holds the goods in the capacity of an ordinary bailee or warehouseman upon the theory that the exercise of the right of stoppage in transitu terminates the contract of carriage. Hence, only ordinary diligence is required [Agbayani (1987)].

E. STIPULATION FOR LIMITATION OF LIABILITY There are two possible stipulations limiting the liability of the common carrier: (1) Stipulation limiting the common carrier’s liability as to the diligence required; and (2) Stipulation limiting the common carrier’s liability as to the amount of liability. An agreement limiting the common carrier’s liability for delay on account of strikes or riots is also valid [Art. 1748]. E.1. AS TO DILIGENCE REQUIRED 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:

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(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 [Art. 1744]. Any of the following or similar stipulations shall be considered unreasonable, unjust and contrary to public policy: (1) That the goods are transported at the risk of the owner or shipper; (2) That the common carrier will not be liable for any loss, destruction, or deterioration of the goods; (3) That the common carrier need not observe any diligence in the custody of the goods; (4) That the common carrier shall exercise a degree of diligence less than that of a good father of a family, or of a man of ordinary prudence in the vigilance over the movables transported; (5) That the common carrier shall not be responsible for the acts or omission of his or its employees; (6) That the common carrier’s liability for acts committed by thieves, or of robbers who do not act with grave or irresistible threat, violence or force, is dispensed with or diminished; (7) That the common carrier is not responsible for the loss, destruction, or deterioration of goods on account of the defective condition of the car, vehicle, ship, airplane or other equipment used in the contract of carriage [Art. 1745]. The following stipulations are also void: (1) Stipulation exempting the common carrier from any and all liability for loss or damage occasioned by its own negligence;

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(2) Stipulation providing for an unqualified limitation of such liability to an agreed stipulation [Heacock v. Macondray (1921)]. E.2. LIMITATION OF LIABILITY TO FIXED AMOUNT A stipulation that the common carrier’s liability is limited to the value of the goods appearing in the bill of lading, unless the shipper or owner declares a greater value, is binding [Art. 1749]. A contract fixing the sum that may be recovered by the owner or shipper for the loss, destruction or deterioration of the goods is valid if: (1) It is reasonable and just under the circumstances; and (2) It has been fairly and freely agreed upon [Art. 1750]. While a passenger may not have signed the plane ticket, he is nevertheless bound by the provision thereof; such provisions have been held to be part of the contract of carriage and valid and binding upon the passenger regardless of the latter’s lack of knowledge or assent to the regulation. It is what is known as a contract of adhesion wherein one party imposes a ready-made form of contract on the other. The one who adheres to the contract is in reality free to reject it entirely. A contract limiting liability upon an agreed valuation does not offend against the policy of the law forbidding one from contracting against his own negligence [Ong Yiu v. CA (1979)]. [However], the fact that the conditions are printed at the back of the ticket stub in letters so small that they are hard to read would not warrant the presumption that the [shipper] was aware of those conditions such that he had “fairly and freely agreed” to those conditions [Shewaram v. PAL (1966)].

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Factors Affecting Agreement The effect of these stipulations is subject to the following provisions: (1) An agreement limiting the common carrier’s liability may be annulled by the shipper or owner if the common carrier refused to carry the goods unless the former agreed to such stipulation [Art. 1746]. (2) 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 [Art. 1747]. The limitation may be availed of if the delay or change of route was due to a just cause. (3) The fact that the common carrier has no competitor along the line or route, or a part thereof, to which the contract refers shall be taken into consideration on the question of whether or not a stipulation limiting the common carrier’s liability is reasonable, just and in consonance with public policy [Art. 1751]. (4) Even when there is an agreement limiting the liability of the common carrier in the vigilance over the goods, the common carrier is disputably presumed to have been negligent in case of their loss, destruction or deterioration [Art. 1752]. E.3. LIMITATION OF LIABILITY IN ABSENCE OF DECLARATION OF GREATER VALUE A stipulation that the common carrier’s liability is limited to the value of the goods appearing in the bill of lading, unless the shipper or owner declares a greater value, is binding [Art. 1749].

F. LIABILITY PASSENGERS

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FOR

BAGGAGE

OF

Baggage are things that a passenger will bring with him consistent with a temporary absence from where he lives. Passenger’s baggage must have a direct relationship with the passenger who is traveling. For instance, a balikbayan box or suitcase is passenger’s baggage. However, 10,000 cans of corned beef is not considered as passenger baggage. They are considered as goods. They are not part of the contract of carriage [of passenger]. A separate contract of carriage [or bill of lading] must be entered into in order to transport them. These goods will then be transported whether or not a person is physically traveling with them [Agbayani (1987)]. There are two kinds of passenger’s baggage, which are governed differently: (1) Passenger baggage in the custody of the passenger (or carry-on luggage); and (2) Passenger baggage not in the custody of the passenger (or checked-in luggage). The liability is greater for baggage that is in the custody of the carrier, or checked-in baggage, as compared to those in the possession of the passenger. F.1. CHECKED-IN BAGGAGE The provisions of Arts 1733-1753 shall apply to passenger’s baggage which is not in his personal custody or in that of his employee [Art. 1754]. In other words, the rules governing the responsibility of a common carrier in the transportation of goods just discussed apply. Thus, extraordinary diligence is required.

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TRANSPORTATION LAW IN

POSSESSION

OF

As to baggage other than checked-in baggage, they are governed by Arts 1998, and 2000-2003, concerning the responsibility of hotel-keepers [Art. 1754]. Art. 1998, as applied by analogy, the baggage of passengers in their personal custody or in that of their employees, while being transported, are regarded as necessary deposits. The common carriers are responsible as depositaries, provided that: (1) Notice was given to them, or to their employees, of the effects brought by the passengers; and (2) The passengers take the precautions which the common carrier advised relative to the care and vigilance of their baggage.

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The following provisions also figure in determining the liability of the common carrier: (1) The fact that passengers are constrained to rely on the vigilance of the common carrier shall be considered in determining the degree of care required of him [Art. 2000). (2) The common carrier cannot free himself from responsibility by posting notices to the effect that he is not liable for the articles brought by the passenger. (3) Any stipulation whereby the responsibility of the common carrier as set forth in Articles 1998-2001 is suppressed or diminished shall be void [Art. 2003].

In case of loss or injury to the baggage of passengers in their personal custody, or in that of their employees, while being transported, the carrier is liable if the loss or injury is caused by: (1) His servants; (2) His employees; (3) Strangers [Art. 2000]; or (4) A thief or robber done without the use of arms or irresistible force [Art. 2001]. The carrier is not liable if loss or injury is caused by: (1) Force majeure [Art. 2000); (2) Theft or robbery with the use of arms or irresistible force [Art. 2001); (3) The acts of the passenger, his family, servants, or visitors; (4) The character of the baggage [Art. 2002).

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III. Safety of Passengers

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stipulation limiting the common carrier’s liability for willful acts or gross negligence is invalid. The reduction of fare does not justify any limitation of the common carrier’s liability [Art. 1758].

A. LIABILITY, IN GENERAL Under Philippine law, the liability of the common carrier with respect to the safety of passengers, in general, are as follows: (1) A common carrier is bound to carry the passengers safely as far as human care and foresight can provide, using the utmost diligence of very cautious persons, with a due regard for all the circumstances [Art. 1755]. (2) In case of death of or injuries to passengers, common carriers are presumed to have been at fault or to have acted negligently, unless they prove that they observed extraordinary diligence [Art. 1756]. Note: It is not enough that the accident was caused by force majeure, the common carrier must still prove that it was not negligent in causing the injuries resulting from such accident. [Bachelor Express v. CA (1990)] Bachelor Express illustrates that force majeure is not itself a defense; the exercise of the diligence required by law is the defense.

C. DURATION OF LIABILITY As in the contract of carriage for goods, the perfection of the contract of carriage of passengers does not necessarily coincide with the commencement of the duty of extraordinary diligence. It may occur at the same time or later. Based on jurisprudence, the duty that the carrier of passengers owes to its patrons extends to persons boarding the cars as well as those alighting therefrom [Del Prado v. Manila Railroad (1929)]. This is also reflected in Art. 17, Warsaw Convention, which applies to international air carriage. It provides that the liability of a common carrier for injury to the passenger lasts from embarkation to disembarkation, including the period when the passenger is on board the aircraft. In maritime commerce, Art. 698, Code of Commerce relates to the period of the voyage: (1) In case a voyage already begun should be interrupted:

B. VOID STIPULATIONS

(a) The passengers shall be obliged to pay the fare in proportion to the distance covered; and

General rule: The responsibility of a common carrier for the safety of passengers cannot be dispensed with or lessened by stipulation by the posting of notices, by statements on tickets, or otherwise [Art. 1757]. Exception: When a passenger is carried gratuitously, a stipulation limiting the common carrier’s liability for negligence is valid.

(b) If the interruption is due to a fortuitous event, without right to recover for losses and damages; if caused by the captain exclusively, with a right to indemnity. (2) If the interruption should be caused by the disability of the vessel, and a passenger should agree to await the repairs:

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(a) He may not be required to pay any increased price of passage; but (b) His living expenses during the stay shall be for his own account. (3) In case of delay in the departure of the vessel, the passengers have: (a) The right to remain on board; (b) If the delay is not due to a fortuitous event or force majeure, with the right to be furnished with food for the account of the vessel; (c) If the delay should exceed ten days: (i) Passengers requesting the same shall be entitled to the return of the fare; and (ii) If it is due exclusively to the fault of the captain or ship agent, they may also demand indemnity for losses and damages. A vessel exclusively devoted to the transportation of passengers must take them directly to the port or ports of destination, no matter what the number of passengers may be, making all the stops indicated in its itinerary. C.1. WAITING FOR CARRIER BOARDING OF CARRIER

OR

As to the commencement of the duty of the common carrier, in Del Prado v. Manila Railroad (1929), it was held that the duty extends to persons boarding the cars as well as those alighting therefrom. Thus, it is the duty of common carriers of passengers to stop their conveyances at a reasonable length of time in order to afford passengers an opportunity to board and enter, and they are liable for injuries suffered by boarding passengers resulting from the sudden starting up or jerking of their conveyances while they are doing so [Dangwa Transportation v. CA (1991)].

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In this connection, however, a person boarding a moving car must be taken to assume the risk of injury from boarding the car under the conditions open to his view, but he cannot fairly be held to assume the risk that the motorman, having the situation in view, will increase the peril by accelerating the speed of the car before he is planted safely on the platform [Del Prado v. Manila Railroad (1929)]. C.2. ARRIVAL AT DESTINATION As to the termination of the duty of the common carrier, it has been held that the relation of carrier and passenger does not cease at the moment the passenger alights from the carrier’s vehicle at a place selected by the carrier at the point of destination, but continues until the passenger has had a reasonable time or a reasonable opportunity to leave the carrier’s premises. What is a reasonable time or a reasonable delay within this rule is to be determined from all the circumstances: (1) A person who, after alighting from a train, walks along the station platform is considered still a passenger; (2) A passenger, who has alighted at his destination and is proceeding by the usual way to leave the company’s premises, but before actually doing so is halted by the report that his brother, a fellow passenger, has been shot, and he in good faith and without intent of engaging in the difficulty, returns to relieve his brother, is deemed reasonably and necessarily delayed and thus continues to be a passenger entitled as such to the protection of the railroad and company and its agents [La Mallorca v. CA (1966)]. The reasonableness of time should be made to depend on the attending circumstances of the case, such as the kind of common carrier, the nature of its business, the customs of the place, and so forth, and therefore precludes a consideration of the time element per se without taking into account such other factors. The primary

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factor to be considered is the existence of a reasonable cause as will justify the presence of the victim on or near the petitioner’s vessel.

This liability does not cease even upon proof that they exercised all the diligence of a good father of a family in the selection and supervision of their employees [Art. 1759].

In the case of a shipper, the passengers of vessels are allotted a longer period of time to disembark from the ship than other common carriers such as a passenger bus, since such vessels are capable of accommodating a bigger volume of both passenger and baggage as compared to the capacity of a regular commuter bus. Consequently, a ship passenger will need at least an hour as is the usual practice, to disembark from the vessel and claim his baggage whereas a bus passenger can easily get off the bus and retrieve his luggage in a very short period of time [Aboitiz Shipping v. CA (1989)].

Also, this liability cannot be eliminated or limited by stipulation, by the posting of notices, by statements on the tickets or otherwise [Art. 1760].

The relation of carrier and passenger continues until the latter has been landed at the port of destination and has left the carrier’s premises. Hence, the carrier necessarily would still have to exercise extraordinary diligence in safeguarding the comfort, convenience and safety of its stranded passengers until they have reached their final destination [PAL v. CA (1993)]. Note: Despite the Court’s pronouncement in PAL v. CA, note that common carriers are bound to observe extraordinary diligence in the ‘safety’ of its passengers. The law does not mention the words ‘comfort’ and ‘convenience.’

D. LIABILITY FOR ACTS OF OTHERS D.1. EMPLOYEES Common carriers are liable for the death of or injuries to passengers through the negligence or willful acts of the former’s employees, although such employees may have acted beyond the scope of their authority or in violation of the orders of the common carriers.

Ratio: The servant is clothed with delegated authority and charged with the duty to execute the carrier’s undertaking to carry the passenger safely [Agbayani (1987)]. Also, the defense of diligence in the selection and supervision of employees does not obtain because the liability is not based on quasi-delict, but on culpa contractual. However, there must be a reasonable connection between the act and the contract of carriage. Note: The employee must be on duty at the time of the act. It is enough that the assault happens within the course of the employee’s duty. It is no defense for the carrier that the act was done in excess of authority or in disobedience of the carrier’s orders. The carrier’s liability here is absolute in the sense that it practically secures the passengers from assaults committed by its own employees [Maranan v. Perez (1967)]. D.2. OTHER STRANGERS

PASSENGERS

AND

A common carrier is responsible for injuries suffered by a passenger on account of the willful 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 fam ily could have prevented or stopped the act or omission [Art. 1763]. Note: The law speaks of injuries suffered by the passenger but not death. However, there appears to be no reason why the common carrier should not be held liable under such circumstances. The word “injuries” should be interpreted to include death [Agbayani (1987)].

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Under Art. 1763, a tort committed by a stranger which causes injury to a passenger does not accord the latter a cause of action against the carrier. The negligence for which a common carrier is held responsible is the negligent omission by the carrier’s employees to prevent the tort from being committed when the same could have been foreseen and prevented by them. Further, when the violation of the contract is due to the willful acts of strangers, as in the instant case, the degree of care essential to be exercised by the common carrier for the protection of its passenger is only that of a good father of a family [Pilapil v. CA (1989)].

It is negligence per se for a passenger on a railroad to voluntarily or inadvertently protrude his arm, hand, elbow, or any other part of his body through the window of a moving car beyond the outer edge of the window or outer surface of the car, so as to come in contact with objects or obstacles near the track; no recovery can be had for an injury which but for such negligence would not have been sustained [Isaac v. A. L. Ammen Transportation (1975)]. In this case, the negligence of the passenger was not contributory, but was the proximate cause of the injury. Hence, the common carrier was exempted from liability.

F. EXTENT DAMAGES

D.3. MANUFACTURERS OF EQUIPMENT While the carrier is not an insurer of the safety of the passengers, it should nevertheless be held answerable for the flaws of its equipment, if such flaws were discoverable. The rationale for the common carrier’s liability for manufacturing defects is the fact that the passenger has neither choice nor control over the carrier in the selection and use of the equipment and appliances in use by the carrier. Having no privity whatever with the manufacturer or vendor of the defective equipment, the passenger has no remedy against him [Necesito v. Paras (1958)].

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OF

LIABILITY

FOR

Damages recoverable from common carriers, both in cases of carriage of passengers and goods, shall be awarded in accordance with Title XVIII concerning Damages. Art. 2206, on liability, in case of death, for loss of earning capacity, support, and moral damages for mental anguish, shall also apply to the death of a passenger caused by the breach of contract by a common carrier [Art. 1764]. Thus, the damages recoverable are: (1) Actual or compensatory damages;

E. CONTRIBUTORY NEGLIGENCE

(2) Moral damages;

The passenger must observe the diligence of a good father of a family to avoid injury to himself [Art. 1762]. The contributory negligence of the passenger does not bar recovery of damages for his death or injuries, if the proximate cause thereof is the negligence of the common carrier, but the amount of damages shall be equitably reduced [Art. 1762].

(3) Exemplary damages; (4) Nominal, temperate, and liquidated damages; (5) Attorney’s fees. F.1. ACTUAL DAMAGES

OR

COMPENSATORY

Actual or compensatory damages refer to adequate compensation for such pecuniary loss suffered as duly proved (Art. 2199].

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Under Art. 2201, the liability for damages include:

(2) The common carrier acted in bad faith [Art. 2220];

(1) In case the common carrier acted in good faith:

(3) Death of a passenger resulted even in the absence of bad faith or fraud [Art. 2206].

(a) The natural and probable consequence of the breach of the obligation; and (b) Those which the parties have foreseen or could have reasonably foreseen at the time the obligation was constituted; (2) In case of fraud, bad faith, malice or wanton attitude, all damages which may be reasonably attributed to the non-performance of the obligation. In case of death, actual damages also include: (1) Loss of earning capacity, unless the deceased had no earning capacity at the time of death; and (2) Support for a period not exceeding five years [Art. 2206]. Note: Art. 2206 applies only in case of death of the passenger. In the absence of a showing that common carrier’s attention was called to the special circumstances requiring prompt delivery of a passenger’s luggage, the common carrier cannot be held liable for the cancellation of passenger’s contracts [for exhibition of films] as it could not have foreseen such an eventuality when it accepted the luggage for transit [Pan-Am World Airways v. IAC (1988)]. F.2. MORAL DAMAGES Moral damages, though incapable of pecuniary computation, if they are the proximate result of the common carrier’s wrongful act or omission, may be recovered [Art. 2217].

Bad faith contemplates a state of mind affirmatively operating with furtive design or with some motive of self-interest or will or for ulterior purpose [Air France v. Carrascoso (1966)]. When it comes to contracts of common carriage, inattention and lack of care on the part of the carrier resulting in the failure of the passenger to be accommodated in the class contracted for amounts to bad faith or fraud which entitles the passenger to the award of moral damages in accordance with Art. 2220 [Ortigas v. Lufthansa (1975)]. Willful and deliberate overbooking on the part of the airline carrier constitutes bad faith. Under Section 3, Economic Regulations No. 7 of the Civil Aeronautics Board, overbooking, which does not exceed ten percent, is not considered as deliberate and therefore does not amount to bad faith [United Airlines v. CA (2001)]. F.3. EXEMPLARY DAMAGES In a contract of carriage, exemplary damages may be awarded if the common carrier acted in wanton, fraudulent, reckless, oppressive, or malevolent manner [Art. 2232]. Exemplary damages serves as an instrument to serve the ends of law and public policy by reshaping socially deleterious behaviors, specifically, in the case, to compel the common carrier to control their employees, to tame their reckless instincts, and to force them to take adequate care of human beings and their property [Mecenas v. CA].

In cases of breach of contract of carriage, moral damages may be recovered where: (1) The common carrier acted fraudulently;

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F.4. NOMINAL, TEMPERATE, LIQUIDATED DAMAGES

AND

Nominal dam ages are adjudicated in order that a right of the plaintiff, which has been violated by the defendant, may be vindicated or recognized, not for the purpose of indemnifying the plaintiff for any loss suffered by him [Art. 2221]. It may be awarded in case of breach of contract of carriage and in every case where any property right has been invaded [Art. 2222]. A violation of the passenger’s right to be treated with courtesy in accordance with the degree of diligence required by law to be exercised by every common carrier entitles the passenger to nominal damages [Saludo v. CA]. Temperate or moderate damages, which are more than nominal but less than compensatory damages, may be recovered when some pecuniary loss has been suffered but its amount cannot, from the nature of the case, be proved with certainty [Art. 2224]. Liquidated damages are those damages agreed upon by the parties to a contract, to be paid in case of breach thereof [Art. 2226]. F.5. ATTORNEY’S FEES Under Art. 2208, as applicable to a contract of carriage, attorney’s fees and expenses of litigation may be recovered in the following cases: (1) When exemplary damages are awarded; (2) When the common carrier’s act or omission has compelled the plaintiff to litigate with third persons or to incur expenses to protect his interest; (3) Where the common carrier acted in gross and evident bad faith in refusing to satisfy the plaintiff’s valid, just and demandable claim; (4) In any other case where the court deems it just and equitable that attorney’s fees and expenses of litigation should be recovered.

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IV. Bill of Lading (Reference is to the Code of Commerce, unless otherwise indicated) Definition Bill of lading – a written acknowledgement, signed by the master of a vessel or other authorized agent of the carrier, that he has received the described goods from the shipper, to be transported on the expressed terms to the described place of destination, and to be delivered there to the designated consignee or parties [70 Am. Jur. 2d 924]. It is not, however, indispensable for the creation of a contract of carriage. [Cia. Maritima v. Ins. Co. of North America (1964)]. In the absence of a bill of lading, disputes shall be determined by the legal proofs which the parties may present in support of their respective claims, according to the general provisions established in the Code of Commerce for commercial contracts [Art. 354, Code of Commerce]. The bill of lading becomes effective usually upon its delivery to and acceptance by the shipper [Aquino, Essentials of Transportation & Public Utilities Law (2011)]. In the absence of fraud, concealment, or improper conduct, it is presumed that the stipulations of the bill are known to the shipper, and he is generally bound by his acceptance whether he reads the bill or not [Magellan Mfg. Marketing Corp. v. CA (1991)].

A. THREE-FOLD CHARACTER: (1) Receipt as to the quantity and description of the goods shipped; (2) Contract to transport and deliver the goods to the consignee or other person therein designated, on the terms specified in such instrument; and (3) Docum ent of title, which makes it a symbol of the goods.

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The bill of lading constitutes the legal evidence of the contract of transportation, and all disputes between the parties regarding the execution and performance of the contract shall be decided by the contents of the bill of lading issued by the carrier. The law admits no exceptions other than the falsity and material error in its drafting [Art. 353].

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merchandise which he may make to the point of delivery. Should he not do so, he shall be liable for damages cause by the delay [Art. 358]. If no indemnity is fixed and there is delay, the carrier shall be liable for the damages which may have been caused by the delay [Art. 370]. C.2. DELIVERY WITHOUT SURRENDER OF BILL OF LADING

B. REFUSAL TO TRANSPORT General Rule: The carrier cannot refuse to carry a particular class of goods. Exception: When the goods are unfit for transportation. If transportation is insisted upon in case of railway transport, the company shall carry them, but it shall be exempt from all responsibility if the objections are so stated in the bill of lading [Art. 356].

C. DELIVERY OF GOODS The goods should be delivered to the consignee or any other person to whom the bill of lading was validly transferred or negotiated. The carrier is duty bound to deliver the goods in the same condition in which, according to the bill of lading, they were found at the time of there were received, without damage or impairment [Art. 363]. C.1. PERIOD OF DELIVERY Delivery should be made within the period fixed for the delivery of the goods as stipulated in the bill of lading [Art. 370]. In case of failure to deliver, the carrier shall pay the indemnity agreed upon in the bill of lading, neither the shipper nor consignee being entitled to anything else. Should there be no period previously fixed, the carrier is bound to forward the goods in the first shipment of the same or similar

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, exception being made of the provisions of Art. 366, on period for filing claims [Art. 353, 2nd para.]. If, in case of loss or for any other reason whatsoever, the consignee cannot return, upon receiving the merchandise, the bill of lading subscribed by the carrier, he shall give said carrier a receipt for the goods delivered. This receipt produces the same effects as the return of the bill of lading [Art. 353, 3rd para.]. C.3. REFUSAL OF CONSIGNEE TO TAKE DELIVERY The consignee may refuse to take delivery in the following cases: (1) If only part of the goods transported should be delivered, when he proves that he cannot make use thereof without the others [Art. 363]. (2) When the goods are rendered useless for purposes of sale or consumption in the use for which they are properly destined, in which case the consignee may demand payment of the goods at current market prices [Art. 365]; (3) In case part of the goods is in good condition and separation is possible,

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the consignee may refuse to receive only the damaged goods [Art. 365]. (4) Where the delay is through the fault of the carrier [Art. 371]. In case of dispute as to the condition of the goods, the same shall be examined by experts appointed by the parties, and the third one, in case of disagreement, appointed by the judicial authority. If the persons interested should not agree with the report, said judicial authority shall order the deposits of the merchandise in a safe warehouse, and the parties interested shall make use of their rights in the proper manner. [Art. 367].

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governing their actions. Understandably, when the goods were delivered, the necessary clearance had to be made before the package was opened. Upon opening and discovery of the damaged condition of the goods, a report to this effect had to pass through the proper channels before it could be finalized and endorsed by the institution to the claims department of the shipping company.” No claim whatsoever shall be admitted against the carrier with regard to the condition in which the goods transported were delivered: (1) After the periods mentioned have elapsed; or (2) After the transportation charges have been paid.

D. PERIOD FOR FILING CLAIMS Pursuant to Art. 366, Code of Commerce, a claim , on account of damage found upon opening the packages, must be made against the carrier: (1) Within 24 hours, if the indications of the damage cannot be ascertained from the exterior of the packages (i.e., latent damage); or (2) At the time of receipt, if the indications damage can be so ascertained (i.e., patent damage). But the Court in Aboitiz v Insurance Company of North America [GR No. 168402, 6 Aug 2008] made a pro hac vice ruling, in that even if the notice was given more than 24 hrs after the receipt of the goods, the notice requirement was held nevertheless to have been complied with, due to the peculiar circumstances: “Provisions specifying a time to give notice of damage to common carriers are ordinarily to be given a reasonable and practical, rather than a strict construction. We give due consideration to the fact that the final destination of the damaged cargo was a school institution where authorities are bound by rules and regulations

The periods mentioned commence upon delivery of cargo to the consignee at the place of destination. Thus, Art. 366 is limited to cases of claims for damage to goods actually turned over by the carrier and received by the consignee. It does not apply to misdelivery of goods. Failure to file a claim bars recovery (Aquino (2011)]. Ratio: The rule protects the carrier by affording 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 and fraudulent claims [UCPB General Ins. Co., Inc. v. Aboitiz Shipping (2009)]. However, the periods prescribed may be subject to modification by agreement of the parties. [PHILAMGEN v. Sweet Lines, Inc. (1992)]. The value of the goods stated in the bill of lading is conclusive between the parties, and the shipper is not allowed to prove a higher value [Art. 372]. It is only when the carrier’s fault is so gross as to amount to actual fraud that the actual amount of the losses an damages suffered may be proved by the shipper against the carrier.

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Horses, vehicles, vessels and equipment used by the carrier serves as liens for the payment of the value of the goods which the carrier must pay in case of loss or misplacement [Art. 372].

E. PERIOD FOR FILING ACTIONS E.1. OVERLAND TRANSPORTATION AND COASTWISE SHIPPING The general rules under the Civil Code on extinctive prescription apply. Thus, action for damages must be filed in court: (1) Within 6 years, if a bill of lading was not issued [Art. 1145, Civil Code]. (2) Within 10 years, if a bill of lading was issued [Art. 1146, Civil Code]. E.2. INTERNATIONAL GOODS BY SEA

CARRIAGE

OF

Suit must be brought within one year: (1) After delivery of the goods; or (2) From the date when the goods should have been delivered. Otherwise, the carrier and the ship shall be discharged from all liability in respect of loss or damage. The absence of notice shall not affect or prejudice the right of the shipper to bring suit within one year after the delivery of the goods or the date when the goods should have been delivered [Section 3(6), Carriage of Goods by Sea Act].

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FALSE DECLARATION OF CONTENTS If the carrier has a well-founded suspicion of falsity in the declaration of the contents of the package, the carrier may examine it. If the declaration should be correct, examination and repacking expenses shall be defrayed by the carrier, and in the contrary, by the shipper [Art. 357].

RESPONSIIBILITY OF THE CARRIER The responsibility of the carrier commences from the moment he personally or through his duly authorized agent receives the merchandise, and at the place indicated for their reception [Art. 355]. When there is an agreed route, the carrier shall be liable for losses due not only to the change of route but also to other causes, together with the indemnity agreed upon [Art. 359]. When there is no agreed route, the carrier must select one which may be the shortest, least expensive and practically passable. All damages and impairment suffered by the goods during the transportation, by reason of fortuitous event or by the nature or defect of the articles, shall be for the account of the shipper. Proof of these accidents is incumbent on the carrier [Art. 361]. Note: Common carriers are responsible for loss, destruction or deterioration of the goods, unless it exercised extraordinary diligence, or the loss is due to Art. 1734 of the Civil Code.

The period for filing the claim is one year, in accordance with the Carriage of Goods by Sea Act. The Carriage of Goods by Sea Act, as adopted and embodied in Commonwealth Act No. 65, applies because it is a special law, and, as such, prevails over the general provisions of the Civil Code on prescription of actions [Maritime Agencies & Services, Inc. v. CA].

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V. Admiralty and Maritime Commerce

(3) Voyage or trip charter [Litonjua Shipping, Inc. v. National Seamen Board (1989)].

Concept The concept of admiralty, as distinguished from overland transportation, depends on: (1) Size of the vessel; and (2) Size of the body of water over which such vessel traverses. Under B.P. 129, jurisdiction over admiralty cases depends on the amount, and not on the nature of the claim.

A. CHARTER PARTIES Charter party – a contract by virtue of which the owner or agent of a vessel binds himself to transport merchandise or persons for a fixed price. It is a contract by which the owner or agent of the vessel leases for a certain price the whole or portion of a vessel for the transportation of the goods or persons from one port to another. It is a contract whereby the whole or part of the ship is let by the owner to a merchant or other person for a specified time or use for the conveyance of goods, in consideration of the payment of freight [Caltex v. Sulpicio Lines (1999)]. Towage is not a charter party. It is a contract for the hire of services by which a vessel is engaged to tow another vessel from one port to another for consideration. In modern maritime law and usage, there are three distinguishable types of charter parties: (1) Bareboat or demise charter; (2) Time charter; and

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Note: Both time and voyage charters are said to be contracts of affreightment, where a common or public carrier is not converted into a private carrier. Contract of affreightment – 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 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 [Puromines, Inc. v. CA (1993)]. Bill of lading distinguished from a charter party A charter party is a complete contract, while a bill of lading is a private receipt which the captain gives to accredit that such goods belong to such persons. A charter party is a consensual contract which can be dissolved by means of indemnity for losses and damages; while a bill of lading is a real contract which exists only after delivery of the goods to be transported is made. Liabilities arising from breach is identical to overland transport. A.1. BAREBOAT OR DEMISE CHARTER In a bareboat or demise charter, the ship owner leases to the charterer the whole vessel, transferring to the latter the entire command, possession and consequent control over the vessel’s navigation, including the master and the crew, who thereby become the charterer’s “servants” [Aquino (2011)].

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To create a demise, the owner of a vessel must completely and exclusively relinquish possession, com m and 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.

A.3. VOYAGE OR TRIP CHARTER

Although a charter party may transform a common carrier into a private one, the same, however, is not true in a contract of affreightment on account of the distinctions between a contract of affreightment and a demise or bareboat charter [Puromines, Inc. v. CA (1993)].

B. LIABILITY OF SHIP OWNERS AND SHIPPING AGENTS

Note: In a bareboat or demise charter, the common carrier is converted to private carrier.

In a voyage charter, the vessel is leased for a single or particular voyage. The master and crew remain the employ of the owner of the vessel [Litonjua Shipping Co., Inc. v. National Seamen Board (1989)].

The persons participating in maritime commerce are the following: (1) Ship owners or ship agents (2) Captains and masters (3) Other officers and crew

The charterer, to whom the owner of the vessel relinquishes, completely and exclusively, the possession, command and navigation of the vessel, by virtue of a demise charter, is considered the owner pro hac vice. He mans and equips the vessel and assumes all responsibility for navigation, management and operation. He thus acts as the owner of the vessel in all important aspects during the duration of the charter [Puromines, Inc. v. CA (1993)].

(4) Supercargoes

A.2. TIME CHARTER

A ship agent is the person entrusted with the provisioning of a vessel, or who represents her in the port in which she happens to be [Art. 586].

Time charter – a contract for the use of a vessel for a specified period of time or for the duration of one or more specified voyages. In this case, the owner of a time-chartered vessel 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 [Litonjua Shipping Co., Inc. v. National Seamen Board (1989)].

The ship owner has possession, control and management of the vessel and the consequent right to direct her navigation and receive freight earned and paid, while his possession continues; he is the person who is primarily liable for damages sustained in the operation of the vessel, based on the provisions of the Code of Commerce.

The ship agent, even though he is not the owner, is liable in every way to the creditor for losses and damages, without prejudice to his right against the owner, the vessel and its equipment and freight [Aquino (2011)]. Captains are those who govern vessels that navigate the high seas or ships of large dimensions and importance, although they may be engaged in coastwise trade. Masters are those who command smaller ships engaged exclusively in coastwise trade. In maritime commerce, masters and captains are the same.

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A crew is a person on board who is involved in highly technical tasks and in manning of the vessel (e.g. master, mate). A com plem ent is a person, not a crew, who is not directly involved in the manning of the vessel (e.g. cook).

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B.1. LIABILIITY FOR ACTS OF CAPTAIN Three (3) distinct roles of a captain: (1) General agent of the ship owner; (2) Commander and technical director of the vessel;

Supercargo is a person on board the vessel, who functions as an agent of the owner of the goods shipped as cargo on a vessel, who has charge of the cargo on board, sells the same to the best advantage in the foreign markets, buys cargo to be brought back on the return voyage of the ship, and comes home with it.

(3) Representative of the country under whose flag he navigates [Inter-Orient Marine Enterprises v. NLRC (1994)].

The powers and liabilities of the captain shall cease, when there is a supercargo, with regard to that part of the administration legitimately conferred upon the latter, but shall continue in force for all acts which are inseparable from his authority and office [Art. 649].

(1) For all the damages suffered by the vessel and his cargo by reason of want of skill or negligence on his part;

The ship owner or ship agent is liable: (1) For the acts of the captain, unless the latter exceeds his authority [Art. 586]. (2) For contracts entered into by the captain to repair, equip and provision the vessel, provided that the amount claimed was invested for the benefit of the vessel [Art. 586]. (3) For the indemnities in favor of third persons which may arise from the conduct of the captain in the care of the goods transported, as well as for the safety of passengers transported [Art. 587]. (4) For damages to third persons for tort or quasi-delict committed by the captain, except collision with another vessel [Art. 1759, Civil Code]. (5) For damages in case of collision due to the fault, negligence, or want of skill of the captain, sailing mate, or any other member of the complement [Art. 826].

The captain shall be liable to the agent, and the latter to third persons:

(2) For all the thefts committed by the crew, reserving his right of action against the guilty parties; (3) For the losses, fines, and confiscations imposed on account of violation of the laws and regulations of customs, police, health, and navigation; (4) For the losses and damages caused by mutinies on board the vessel, or by reason of faults committed by the crew in the service and defense of the same, if he does not prove that he made full use of his authority to prevent or avoid them; (5) For those arising by reason of an undue use of powers and non-fulfillment of the obligations which are his; (6) For those arising by reason of his going out of his course or taking a course which he should not have taken without sufficient cause, in the opinion of the officers of the vessel at a meeting with the shippers or supercargoes who may be on board; (7) For those arising by reason of his voluntarily entering a port other than that of his destination; (8) For those arising by reason of nonobservance of the provisions contained in the regulations on situation of lights

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and maneuvers for the purpose of preventing collisions [Art. 618].

contribution to the common fund, for the results of the acts of the captain, referred to in Art. 587. Each part owner may exempt himself from this liability by the abandonment before a notary of the part of the vessel belonging to him [Art. 590].

B.2. EXCEPTIONS TO LIMITED LIABILITY The Doctrine of Limited (Hypothecary Rule)

Liability

The real and hypothecary nature of maritime law simply means that the liability of the carrier in connection with losses related to maritime contracts is confined to the vessel, which is hypothecated for such obligations or which stands as the guaranty for their settlement. It has its origin by reason of the conditions and risks attending maritime trade in its earliest years when such trade was replete with innumerable and unknown hazards since vessels had to go through largely uncharted waters to ply their trade. It was designed to offset such adverse conditions and to encourage people and entities to venture into maritime commerce despite the risks and the prohibitive cost of shipbuilding. Thus, the liability of the vessel owner and agent arising from the operation of such vessel were confined to the vessel itself, its equipment, freight, and insurance, if any, which limitation served to induce capitalists into effectively wagering their resources against the consideration of the large profits attainable in the trade [Aboitiz Shipping Corp. v. General Accident Fire and Life Assurance Corp. (1993)]. Thus, under the doctrine of abandonment: (1) The agent shall be civilly liable for the indemnities in favor of third persons which arise from the conduct of the captain in the care of the goods which the vessel carried, but he may exempt himself therefrom by abandoning the vessel with all her equipment and the freight he may have earned during the voyage [Art. 587]; (2) The owners of a vessel shall be civilly liable in the proportion of their

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(3) In case of collision, the liability of the ship owner shall be understood as limited to the value of the vessel with all her appurtenances and all the freight earned during the voyage [Art. 837]. (4) If the vessel and her freight should be totally lost, by reason of capture or wreck, all rights of the crew to demand any wages whatsoever shall be extinguished, as well as the agent for the recovery of the advances made [Art. 643]. If the ship owner or agent may in any way be held civilly liable at all for injury to or death of passengers arising from the negligence of the captain in cases of collisions or shipwrecks, his liability is merely coextensive with his interest in the vessel such that a total loss thereof results in its extinction. This is based on the exclusively “real and hypothecary nature” of maritime law, which operates to limit such liability to the value of the vessel, or to the insurance thereon, if any. [Yangco v. Laserna (1941)] Exceptions: (1) Claims under the Workmen’s Compensation Act [Abueg v. San Diego]; (2) Expenses for repairing, provisioning and equipping the vessel; (3) There is an actual finding of negligence on the part of the vessel owner or agent [Aboitiz Shipping v. General Accident Fire and Life Assurance Corp. (1993)]; (4) Vessel is insured, to the extent of the insurance proceeds [Vasquez v. CA (1985)]; (5) There was no total loss; (6) Collision between two negligent vessels.

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C. ACCIDENTS AND DAMAGES IN MARITIME COMMERCE

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saved, as well as lenders on bottomry or respondentia.

C.1. AVERAGES The following shall be considered averages:

1. REQUISITES

(1) All extraordinary or accidental expenses incurred during the navigation for the preservation of the vessel or cargo, or both;

(1) There must be a common danger;

(2) All damages or deterioration the vessel may suffer from the time she puts to sea from the port of departure until she casts anchor in the port of destination, and those suffered by the merchandise from the time it is loaded in the port of shipment until it is unloaded in the port of consignment [Art. 806].

(3) That from the expenses or damages caused follows the successful saving of the vessel and cargo;

There are two kinds of averages:

Common danger means both the ship and the cargo, after it has been loaded, are subject to the same danger, whether during the voyage, or in the port of loading or unloading, that the danger arises from the accidents of the sea, dispositions of the authority, or faults of men, provided that the circumstances producing the peril should be ascertained and imminent or may rationally be said to be certain and imminent. This last requirement excludes measures undertaken against a distant peril [Magsaysay, Inc. v. Agan [1955]].

(1) Particular or simple average; and (2) Gross or general average. I. SIMPLE AVERAGE Particular or simple averages shall include all damages and expenses caused to the vessel or cargo that did not inure to the common benefit and profit of all persons interested in the vessel and her cargo [Art. 809]. The owner of the goods which gave rise to the expense or suffered the damage shall bear this average [Art. 810].

(2) That for the common safety, part of the vessel or of the cargo or both is sacrificed deliberately;

(4) That the expenses or damages should have been incurred or inflicted after taking proper legal steps and authority [Magsaysay, Inc. v. Agan [1955]].

Note: When a vessel is stranded unintentionally, the damages incurred cannot constitute general averages. 2. CASES OF GENERAL AVERAGE

II. GENERAL AVERAGE General or gross averages shall include all the damages and expenses which are deliberately caused in order to save the vessel, her cargo, or both at the same time, from a real and known risk [Art. 811]. The gross or general average shall be borne by those who benefited from the sacrifice. These include the ship owner and the owners of the cargoes that were saved. Contribution may also be imposed on the insurers of the vessel or cargoes that were

(1) The goods or cash invested in the redemption of the vessel or cargo captured by enemies, privateers, or pirates, and the provisions, wages, and expenses of the vessel detained during the time the arrangement or redemption is taking place; (2) The goods jettisoned to lighten the vessel, whether they belong to the vessel, to the cargo, or to the crew, and the damage suffered through said act by the goods kept;

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(3) The cables and masts which are cut or rendered useless, the anchors and the chains which are abandoned in order to save the cargo, the vessel, or both; (4) The expenses of removing or transferring a portion of the cargo in order to lighten the vessel and place her in condition to enter a port or roadstead, and the damage resulting therefrom to the goods removed or transferred; (5) The damage suffered by the goods of the cargo through the opening made in the vessel in order to drain her and prevent her sinking; (6) The expenses caused through floating a vessel intentionally stranded for the purpose of saving her; (7) The damage caused to the vessel which it is necessary to break open, scuttle, or smash in order to save the cargo; (8) The expenses of curing and maintaining the members of the crew who may have been wounded or crippled in defending or saving the vessel; (9) The wages of any member of the crew detained as hostage by enemies, privateers, or pirates, and the necessary expenses which he may incur in his imprisonment, until he is returned to the vessel or to his domicile, should he prefer it;

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cargo should be transferred to lighters or barges and be lost, the owner of said part shall be entitled to indemnity, as if the loss has originated from a gross average [Art. 817]; (14) If, as a necessary measure to extinguish a fire in a port; roadstead; creek, or bay, it should be decided to sink any vessel, this loss shall be considered gross average, to which the vessels saved shall contribute. (15) 3. JETTISON The captain shall direct the jettison, and shall order the goods cast overboard in the following order: (1) Goods on deck - beginning with those which embarrass the maneuver or damage the vessel, preferring if possible, the heaviest ones with the least utility and value; (2) Goods below the upper deck - always beginning with those of the greatest weight and smallest value, to the amount and number absolutely indispensable [Art. 815]. To include the goods jettisoned in the general or gross average, the existence of the cargo or goods must be proved:

(10) The wages and victuals of the crew of a vessel chartered by the month during the time it should be embargoed or detained by force majeure or by order of the Government, or in order to repair the damage caused for the common good;

(1) For cargo – by means of bill of lading;

(11) The loss suffered in the value of the goods sold at arrivals under stress in order to repair the vessel because of gross average;

Jason clause is a provision in the contract of carriage that requires the cargo owners to contribute in general average though the event which gave rise to the sacrifice or expenditure may have been due to the fault of one of the parties to the adventure [Rule D, York Antwerp Rules].

(12) The expenses of the liquidation of the average [Art. 811]; (13) If in lightening a vessel on account of a storm, in order to facilitate her entry into a port or roadstead, part of her

(2) For good belonging to the vessel – by means the inventory prepared prior to departure [Art. 816]. 4. JASON CLAUSE

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5. PROCEDURE FOR RECOVERY (1) Assembly and deliberation with the sailing mate and other officers; (2) Resolution of the captain adopted; (3) Hearing of the persons interested. In case an interested person should not be heard, he shall not contribute to the gross average [Art. 813, Code of Commerce];

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When 2 power-driven vessels are meeting head on, or nearly head on, so as to involve risk of collision, each shall alter her course to starboard (right side), so that each may pass on the port (left) side of the other. [Smith Bell and Co. v. CA (1991)]. Note: Liability in collision cases is negligence-based. The person who caused the injury is both civilly and criminally liable [Aquino (2011)].

(4) Resolution to be entered in the log book, stating the motives and reasons therefore as well as the votes and reason for disagreement [Art. 814, Code of Commerce];

Classes of Collision:

(5) Minutes to be signed by all the persons present or in urgent cases, the captain;

(3) Inscrutable Fault - it cannot be determined which of the vessels was at fault.

(6) Captain shall deliver one copy of the minutes to the maritime judicial authority of the first port he may make within 24 hours [Art. 814]; (7) Captain shall ratify the minutes under oath [Art. 814]. C.2. COLLISIONS Collision is an impact or sudden contact between two moving vessels [Aquino (2011)]. Allision is the striking of a moving vessel against one that is stationary. The steamer’s greater facility of maneuvering over a sail vessel means it has the greater ability to avoid collisions; so as a general rule, when meeting a sailing vessel, whether close hauled or with the wind free, the sail vessel has a right to keep her course, and it is the duty of the steamer to adopt precautions as will avoid the sail vessel… Subject to the general rules of evidence in collision cases as to the burden of proof, in the case of a collision between a steam vessel and a sail vessel, the presumption is against the steam vessel, and she must show that she took the proper measures to avoid a collision. [A. Urrutia & Co. v. Baco River Plantation Co. [1913)].

(1) Fortuitous - none was at fault; (2) Culpable - one or more vessels were at fault;

I. FORTUITOUS When it is due to a fortuitous event or force majeure, each vessel and its cargo shall bear its own damages [Art. 830]. When, by reason of force m ajeure, a vessel properly anchored and moored collides with another, the injury occasioned shall be looked upon as particular average to the vessel run into [Art. 832]. II. CULPABLE When only one vessel is at fault, the owner of the vessel at fault shall indemnify the losses and damages suffered, after an expert appraisal. When both vessels are at fault, each shall suffer its own damages, and both shall be solidarily responsible for the losses and damages occasioned to their cargoes [Art. 826]. Note: The ship owners cannot successfully maintain an action against the other for the loss or injury to his vessel. When a third vessel at fault, the owner of the third vessel shall indemnify the losses and damages caused, the captain thereof being civilly liable to said owner [Art. 831].

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III. INSCRUTABLE FAULT In case of inscrutable fault, that is, if it cannot be decided which of the two vessels was the cause of the collision, each shall bear his own damage and both shall be jointly responsible for the losses and damages suffered by their cargoes [Art. 828]. C.3. ARRIVAL UNDER STRESS Arrival under stress is the arrival of a vessel at the nearest and most convenient port instead of the port of destination, if during the voyage the vessel cannot continue the trip to the port of destination. It is lawful when the inability to continue voyage is due to: (1) Lack of provisions; (2) Well-founded fear of seizure, privateers, or pirates; or (3) Any accident of the sea disabling it to navigate [Art. 819]. It is unlawful when: (1) The lack of provisions should arise from the failure to take the necessary provisions for the voyage, according to usage and custom, or if they should have been rendered useless or lost through bad stowage or negligence in their care; (2) The risk of enemies, privateers, or pirates should not have been well known or manifest, and based on positive and justifiable facts; (3) The injury to the vessel should have been caused by reason of her not being repaired, rigged, equipped, and arranged in a convenient manner for the voyage, or by reason of some erroneous order of the captain; or (4) Malice, negligence, want of foresight, or lack of skill on the part of the captain is the reason for the act causing the damage [Art. 820].

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Note: Expenses for arrival under stress are particular averages [see Art. 821]. C.4. SHIPWRECKS Shipwreck denotes loss or wreck of a vessel at sea as a consequence of running against another vessel or thing at sea or on coast where the vessel is rendered incapable of navigation. The losses and deterioration suffered by the vessel and her cargo shall be individually for the account of the owners [Art. 840]. If the wreck was due to malice, negligence or lack of skill of the captain, or because the vessel put to sea was insufficiently repaired and equipped, the ship agent or the shippers may demand indemnity from said captain. [Art. 841]. C.5. SALVAGE Salvage is defined as the service which one person renders to the owner of a ship or goods, by his own labor, preserving the goods or the ship which the owner or those entrusted with the care of them have either abandoned in distress at sea, or are unable to protect and secure. It is founded on equity and is compensation for actual services rendered. Three elements are necessary to a valid salvage claim: (1) A marine peril; (2) Service voluntarily rendered when not required as an existing duty or from a special contract; (3) Success, in whole or in part, or that the service rendered contributed to such success [Erlanger & Galinger v. Swedish East Asiatic Co. Ltd (1916)]. The goods saved from the wreck shall be specially bound for the payment of the expenses of the respective salvage, and the amount thereof must be paid by the owners of the former before they are delivered to them [Art. 842].

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Where a personal action is brought by the salvor against the owner of the ship, the liability of the latter is limited to such part of the salvage compensation due for the entire service as is proportionate to the value of the ship. Distinction between salvage and towage: Towage –a vessel is engaged to tow another vessel from one port to another for consideration. In contract for towage, the crew does not have any interest or rights with the remuneration pursuant to the contract; only the owner of the towing vessel is entitled to remuneration. Salvage – a person preserves the goods or the ship which the owner either abandoned in distress at sea, or is unable to protect and secure. In salvage, the crew of the salvaging ship is entitled to salvage, and can look to the salvage vessel for its share [Barrios v. Go Thong (1963)].

D. CARRIAGE OF GOODS BY SEA ACT (COGSA) D.1. APPLICATION COGSA [Commonwealth Act No. 65] is a special law that governs all contracts of carriage of goods by sea between or to and from the Philippine ports. Its application is according to the following scheme: (1) If the com m on carrier is coming to the Philippines: (a) First: Civil Code; (b) Second: trade);

COGSA

(in

foreign

(c) Third: Code of Commerce;

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(2) If the private carrier is coming to the Philippines: (a) First: COGSA; (b) Second: Code of Commerce; (c) Third: Civil Code (excluding rules on com m on carriers); (3) If the private or common carrier is from the Philippines to a foreign country, the law of the foreign country applies [Art. 1753, Civil Code] unless the parties make COGSA applicable. Under Art. 1766, in all matters not regulated by the Civil Code, the rights and obligations of common carriers shall be governed by the Code of Commerce and special laws. Thus, although a special law, COGSA only applies when the Civil Code has no provision dealing with the matter. D.2. NOTICE OF LOSS OR DAMAGES Notice of claim and the general nature of the loss or damage must 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 [Section 3(6), COGSA]. If damage is not patent or cannot be ascertained from the package, the shipper should file the claim with the carrier within three days from delivery. Under Section 3(6), COGSA, a failure to file a notice of claim within three (3) days will not bar recovery if it is nonetheless filed within one year. This one-year prescriptive period also applies to the shipper, the consignee, the insurer of the goods or any legal holder of the bill of lading. Inasmuch as the neither the Civil Code nor the Code of Commerce states a specific prescriptive period on the matter, the COGSA may be applied [Belgian Overseas Chartering and Shipping v. Philippine First Ins. Co. (2002)]. Note: In the Warsaw Convention, as well as the Code of Commerce, the notice requirement is a condition precedent for the right of action against the shipowner to accrue.

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D.3. PERIOD OF PRESCRIPTION The carrier and the ship shall be discharged from all liability in respect of loss or damage unless suit is brought within one year after delivery of the goods or the date when the goods should have been delivered. The absence of a notice shall not affect or prejudice the right of the shipper to bring suit within one year after the delivery of the goods or the date when the goods should have been delivered [Section 3 (6)]. COGSA, as a special law, prevails over the general provisions of the Civil Code on prescription of actions [Maritime Agencies & Services, Inc. v. CA (1990)]. D.4. LIMITATION OF LIABILITY Under Section 4(5], COGSA, the limit is set at a maximum of $500 per package or customary freight unit. This is deemed incorporated in the bill of lading even if not mention therein [Eastern Shipping v. IAC (1987)]. The declaration made by the shipper stating an amount bigger than $500 per package will make the carrier liable for such bigger amount, but only if the amount so declared is the real value of goods [Aquino (2011)]. The Civil Code does not limit the liability of the common carrier to a fixed amount per package. In all matters not regulated by the Civil Code, the right and the obligations of common carriers shall be governed by the Code of Commerce and special laws. Thus, the COGSA, which is suppletory to the provisions of the Civil Code, supplements the latter by establishing a statutory provision limiting the carrier’s liability in the absence of a shipper’s declaration of a higher value in the bill of lading. [Belgian Overseas v. Philippine First Ins. Co. (2002)]. VESSEL Vessels are those engaged in navigation, whether coastwise or on the high seas

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destined for the services of the industry or maritime commerce. The word ‘vessel’ used in the Code of Commerce was not intended to include all ships, craft, or floating structures of every kind without limitation [Lopez v. Duruelo (1928)]. Vessels are considered personal or movable property [Art. 585]; but they partake to a certain extent, of the nature and conditions of real property, on account of their value and importance in the world of commerce. Vessel of domestic ownership and of more than 15 tons gross is required to acquire a certificate of Philippine register. The purpose of the certificate is declare the nationality of a vessel engaged in trade with foreign nations and to enable her to assert that nationality wherever found.

SPECIAL CONTRACTS OF MARITIME COMMERCE LOANS ON RESPONDENTIA

BOTTOMRY

AND

Loan on bottom ry is a contract in the nature of a mortgage, by which the owner of the ship borrows money for the use, equipment and repair of the vessel and for a definite term, and pledges the ship as a security for its repayment, with maritime or extraordinary interest on account of the maritime risks to be borne by the lender, it being stipulated that if the ship be lost in the course of the specific voyage or during the limited time, by any of the perils enumerated in the contract, the lender shall also lose his money. Loan on respondentia is one made on the goods laden on board the ship, and which are to be sold or exchanged in the course of the voyage, the borrower’s personal responsibility being deemed the principal security for the performance of the contract, which is therefore called respondentia. The lender must be paid his

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principal and interest, though the ship perishes, provided that the goods are saved.

PASSENGERS ON SEA VOYAGE The right to passage issued to a specified person is non-transferrable without the consent of the captain or of the consignee [Art. 695].

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the return of the fare upon request. If the delay is due to the sole fault of the captain or ship agent, they may demand indemnity for losses and damages. (4) To be taken directly to the port or ports of destination, making all the stops indicated in its itinerary [Art. 698].

Rights of passengers include: (1) In case of suspension of voyage (a) If through the sole fault of the captain or ship agent, the passengers shall be entitled to have their passage refunded and to recover for losses and damages. (b) If due to accidental cause or force majeure, the passengers shall only be entitled to the return of the passage money [Art. 697]. (2) In case of interruption of voyage (a) If due to fortuitous event or force majeure, the passengers shall be obliged to pay only the fare in proportion to their distance covered, without right to recover for losses or damages. (b) If due to the sole fault of the captain, the passengers shall be obliged to pay only the fare in proportion to their distance covered, with a right to indemnity. (c) If due to the disability of the vessel and the passenger should agree to await the repairs, he may not be required to pay any increased price of passage, but his living expenses during the delay shall be for his own account [Art. 698]. (3) In case of delay in the departure, the passengers have a right to remain on board and to be furnished food, unless the delay is due to accidental cause or to force majeure. If the delay exceeds 10 days, the passengers are entitled to

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VI. International Air Transport

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The carrier is liable for damages for: (1) Death or injury of a passenger if the accident causing it took place: (a) On board the aircraft;

The Warsaw Convention

(b) In the course of the operations of embarking or disembarking; or

A. APPLICABILITY

(c) When there was delay [Art. 17 and 19, Warsaw Convention];

The Warsaw Convention applies to: (1) All international carriage of persons, baggage, or cargo performed by aircraft for reward; (2) Gratuitous carriage by aircraft performed by an air transport undertaking [Art. 1(1), Warsaw Convention]. International air carriage or international air transport means transportation by air between points of contact of two high contracting parties, or those countries that have acceded to the Warsaw Convention, wherein the place of departure and the place of destination are situated: (1) Within the territories of two high contracting parties, regardless of whether or not there be a break in the transportation or a transshipment; or (2) Within the territory of a single high contracting party, if there is an agreed stopping place within a territory subject to the sovereignty, mandate or authority of another power, even though the power is not a party to the Convention [Art. 1(2), Warsaw Convention]. A carriage to be perform ed by several successive air carriers is deemed, for the purposes of the Convention, to be one undivided carriage, if it has been regarded by the parties as a single operation, whether it had been agreed upon under the form of a single contract or of a series of contracts [Art. 1(3), Warsaw Convention].

(2) Destruction, loss, or damage to any baggage or goods that are checked in, if damage occurred: (a) During the transportation by air; or (b) When there was delay [Section 18 and 19, Warsaw Convention]; (3) Delay in the transport by air of passengers, baggage or goods. The carriage by air contemplated comprises the period in which the baggage or goods are in charge of the carrier, whether in an airport or on board an aircraft, or, in the case of a landing outside an airport, in any place whatsoever [Art. 18, Warsaw Convention].

B. LIMITATION OF LIABILITY With respect to the following limitations of liability, Art. 23, Warsaw Convention provides that any provision tending to relieve the carrier of liability or to fix a lower limit than that which is laid down shall be null and void, but the nullity of any such provision does not involve the nullity of the whole contract. Also, under Art. 25, Warsaw Convention: (1) The carrier shall not be entitled to avail himself of the provisions which exclude or limit his liability, if the damage is caused by his willful misconduct or by such default on his part as is considered to be equivalent to willful misconduct; (2) Similarly the carrier shall not be entitled to avail himself of the said provisions, if the damage is caused as aforesaid by

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any agent of the carrier acting within the scope of his employment. Under Art. 29, Warsaw Convention, the right to damages under the WC is extinguished after two years from the date of arrival at the destination or from the date on which the aircraft ought to have arrived, or from the date on which the carriage stopped. The method of calculating the period of limitation shall be determined by the law of the court seized of the case. B.1. LIABILITY TO PASSENGERS General rule: In the carriage of passengers, the liability of the carrier for each passenger is limited to 250,000 francs passenger. Exception: By special contract, the carrier and the passenger may agree to a higher limit [Art. 22(1), Warsaw Convention]. B.2. LIABILITY FOR CHECKED BAGGAGE General rule: In the carriage of baggage and goods, the liability of the carrier is limited to 250 francs per kilogram. Exception: The limit does not apply when the consignor has made, at the time when the package was handed over to the carrier, a special declaration of the value at delivery 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 actual value to the consignor at delivery [Art. 22(2), Warsaw Convention]. B.3. LIABILITY BAGGAGE

FOR

HAND-CARRIED

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The Guatemala Protocol of 1971 increased the limit for passengers to $100,000 and to $1,000 for baggage. However, the Supreme Court noted in Santos III v. Northwest Orient Airlines (1992), that the Guatemala Protocol is still ineffective [Sundiang and Aquino (2013)]. The Warsaw Convention should be deemed a limit of liability only in those cases where the cause of death or injury to person, or destruction, loss or damage to property or delay in its transport is not attributable to or attended by any willful misconduct, bad faith, recklessness, or otherwise improper conduct on the part of any official or employee for which the carrier is responsible; and there is otherwise no special or extraordinary form of resulting injury [Alitalia Airways v. CA (1990)].

C. WILLFUL MISCONDUCT A common carrier may not avail of the limitation in the following cases: (1) Willful misconduct; (2) Default amounting to misconduct [Art. 25, Convention];

willful Warsaw

(3) Accepting passengers without ticket [Art. 3(2), Warsaw Convention]; (4) 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 have been delivered in good condition and in accordance with the document of carriage [Art. 26, Warsaw Convention].

As regards hand-carried baggage, the liability of the carrier is limited to 5,000 francs per passenger [Art. 22(3), Warsaw Convention].

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D. JURISDICTION An action for damages must be brought at the option of the plaintiff: (1) Before the court of the domicile of the carrier; (2) The court of its principal place of business; (3) The court where it has a place of business through which the contract had been made; or (4) The court of the place of destination [Art. 28 (2) WC]. When a passenger buys a roundtrip ticket, the place of destination is the place of first departure. E.g. In a round-trip ticket from San Francisco – Manila, the place of destination is San Francisco [Santos v Northwest Airlines (1992)]. Note: The Montreal Convention adds a 5th jurisdiction: residence of the plaintiff.

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