Transpo Lecture Loan on Respondentia and Bottomry (January 28, 2011)

Transportation Law Atty Palabrica (FINAL REVIEWER)

Dugie & Mela (2011) , Diato & Cagampan (updates)

TRANSPORTATION LAW- Dec. 3, 2010

I. Air TransportationLhuiller v. British Airways case:

says that the governing law is the Warsaw Convention

issue is jurisdiction

high contacting parties countries which are signatories in the Warsaw convention; countries who abide with the provisions of the agreement in the WC

international flight flight between two high contracting parties (according to WC)

importance to determine if international flight to know the applicability of WC (if international flight, then WC applies)

in this case, international flight (London-Italy) therefore, WC applies

Held: case shall be filed in the:

(a) place of the main office of the airline (London)

(b) place where you bought the ticket (Italy)

(c) place where the incident happened

Therefore: Philippine court has no jurisdiction over the case, case dismissed for lack of jurisdiction

IN ONE CASE:

One guy from Iloilo or Bacolod who joined a golf tournament in Bangkok

He needed to pass Singapore and so he bought ticket from PAL going to Singapore

since PAL has no direct flight from Singapore to Bangkok he got a British Airways ticket going to Thailand from Singapore

He arrived using PALs plane but British Airways would not accept them because the ticket was not indorsed by PAL

BA: if we accept this ticket, there is a possibility that PAL will not pay us

He was not able to use the questioned ticket and Garuda Airways going to Bangkok

Some of them got sick because of the hassle and so was not able to play golf

When they got back in the Phils, they filed a case for damages for breach of contact against PAL

PAL filed motion to dismiss

ISSUES

1. Should the case be filed against BA?

2. Do the Philippine courts have jurisdiction over the case given it is a flight from Singapore to Thailand?

3. Does the WC apply?

HELD

1. No. When he purchased ticket from PAL, PAL only used BA as their agent by virtue of an agreement between airlines and the main carrier is PAL and so PAL should be the one sued.

2. Yes. The cause of contract here is not a breach of contact of carriage but the negligence of PAL in communicating the ticket to the British Embassy as far as the connection is concerned. Note that the negligence happened before contact of carriage was effected.

3. No. The cause of action is not the contract of carriage but PALs negligence making the WC not applicable.

NOTE: Compare the Lhuiller case and this case

II. OBLIGATIONS OF THE PARTIESA. Vigilance over the Cargo

1733. Extraordinary diligence is required

1735. Presumption of negligence in case of loss, damage or deterioration

GR: as long as it is shown that there is damage then the common carrier (CC) could be made liable

EXP: CC could prove that it has exercised extraordinary diligence over the goods

1736. Coverage of extraordinary diligence ( lasts from the time the cargoes are conditionally placed in the position of and received/accepted for transportation by the carrier to be delivered to the consignee, without prejudice to 1738

1737. Even if the cargoes are temporarily unloaded, CC is still obligated to exercise extraordinary diligence UNLESS the shipper/owner avails of the right to stoppage in transitu

stoppage in transitu right of an unpaid vendor to stop the shipment or transportation of the cargo to the consignee because the consignee is not capable of paying him, and so the vessel becomes a warehouse, therefore shall exercise the diligence of the good father of a family and not extraordinary diligence

1738. CC has to continue to operate with extraordinary diligence even if the goods are placed in the warehouse at the place of destination.

Fact that it has reached the destination and place of the warehouse it doesnt follow that the extraordinary diligence has already ceased to exist.

It would only cease to exist if CC has given a reasonable time and given notice to the consignee to release the same

If there is actual or constructive delivery, extraordinary diligence ceases to exist

Actual delivery cargoes were given to the consignee and the consignee receives the cargoes.

Constructive delivery notice was already given to the consignee regarding the arrival of the cargoes and the consignee was already given a reasonable time to release it even if there is no actual release

( In cargoes, if there is delay, then one of the options of the shipper is to abandon the cargo once in transit and ask for the full price of the cargo. But to be able to do so,

Requisites:

1. there should be a demand in writing addressed to the CC stating your intention to abandon the goods

2. it shall be done before the cargo reaches the destination

B. TRANSPORTATION OF PASSENGERS (CC)

1. Obligation to accept the passengers without discrimination

2. Obligation to transport them safely

3. Obligation to transport without delay

When will CC be liable in transporting passengers?

a. When there is delay (1740)

b. When there is deviation (1747)

III. DEFENSES OF THE COMMON CARRIER1734. GR: CCs are responsible for the loss, destruction and deterioration of the goods

EXP: if the same is due to any of the following causes ONLY: memorize!!!

1. floods, storm, lightning, earthquake or other natural disasters and calamities

2. in case of an act of a public enemy during war, international or civil

3. act or omission of the owner of the cargo (shipper)

4. character of the goods or defects in the packing or container

5. order or act of competent public authority

REQUISITES:

Natural Disaster

1. this is the only cause of loss, destruction and deterioration of the goods

2. that the CC has exercised the due diligence in preventing or minimizing the loss before, during and after the occurrence of the natural disaster (1739)

( CC incurs delay (1740) or deviation change of route (1742 or 1741)

Delay delay in the departure and/or arrival

If there is delay, CC is still liable although the goods suffered deterioration, loss or destruction caused by natural calamity, which is an absolute defense.

Act of Public Enemy

1. there should be actual war between the place of destination and place where the carrier belongs, international or civil

public enemy pirates are public enemy, thieves, robbers, rioters and hijackers are not public enemies

Public enemy in war, whether civil or international , as a valid defense of common carrier

There must be an actual war between the country where the common carrier comes from and the country that confiscated the goods. (hijackers, thieves, robbers are not considered as public enemy; but a pirates are considered as such.)

Character of the goods or defect in the packing of the container

Common carrier will not be liable if there are already defects in the goods or in the packing of the goods.

But If the defect is apparent and the common carrier still accepts it, then the fact that there was prior defect could no longer be raised as a defense against the shipper. If the common carrier does not know of the defect then it can be raised as a defense. Provided, that it had exercised the diligence to forestall or minimize damage (Art. 1742).

Order of a Public Authority may be used as a defense when:

It is a valid order

There is a force that could compel the common carrier to abide by the order of the competent authority.

LIABILITIES OF COMMON CARRIER:

Act of an employee that caused injury to the passenger would still make the common carrier liable, whether or not the employee is acting in accordance with his duty; or even if the act of the employee that caused the injury is in violation of the instruction of the common carrier.

It shall also be noted that, by express provision of the law, an act of a stranger or co-passenger of the common carrier that caused injury to another passenger would still make the common carrier liable.

If a passenger was injured and he has not yet paid his fare, then he is not considered a passenger and the common carrier will not be liable to him; but if he has an intention to pay even if he has not yet paid, then he can still be considered as a passenger.

If the passenger was not aware that he rode the wrong bus, he is still considered as a passenger.

If the passenger pretended to be the owner of a plane ticket and boarded the plane, he cannot be considered as passenger because there was fraud on his part.

In the case of gratuitous passenger, the common carrier is still liable; but the liability may be limited depending upon the stipulation of the passenger and the common carrier. However in the case of an ordinary passenger, the liability of the common carrier cannot be lessened or diminished by stipulation.

Note that the stipulated limitation of liability in the case of gratuitous passengers shall only be valid in ordinary negligence. It is not valid if the cause of injury is willful act of gross negligence.

Cause of action if the passenger is injured:

1. Culpa Contractual (breach of contract)

Case against the common carrier only. Cannot be filed against the driver because he is only an agent. Preponderance of evidence is needed to establish liability.

2. Quasi-delict

Case against the driver and the common carrier; based on torts.

3. Culpa Criminal

Case against the driver. Common carrier is subsidiarily liable if the driver is insolvent.

Possible damages:

Actual damages

(life expectancy=2/3 x 80 age) x income and expenses

Moral damages

Hurt feelings, sleepless nights, mental anguish

In culpa contractual, moral damage is not awarded except in the case of death or bad faith.

Exemplary damages

Awarded if there is one or more aggravating circumstances

Nominal damages

Awarded to vindicate the right of the plaintiff.

Transportation Laws Dec. 10, 2010

Code of commerce/ Maritime Law:Corporation A - has bus1, bus 2, and bldg.

The owners of corporation A are:

B who has a house and lot

C- who has a car

D who has a car

Corporation has a distinct and separate personality. So the liability of A cannot be transfer to B, C ,D...

Nature of liability under maritime law: it is real and hypothetical in nature...

What does real and hypothetical in nature mean? It is limited liability.

Limited liability- in case the vessel is totally loss through the fault or negligence of the captain, the liability of ship owner is extinguished.

Authority: Art. 837 under code of commerce: the owner shall be civilly liable for the acts of the captain up to the actual value of the ship, freight...

Limited liability only applies to maritime transaction/ business...

Elements of real and hypothetical in nature:

The vessel is totally or partially loss

Done through negligence or fault of the captain and not the owner

E.g. the real and hypo in nature will not apply: Negros navigation v Miranda

During the voyage, there was a collision of negros navigation and an oil tanker because of the negligence of the captain... but the cause is that the boat is not sea worthy because it sunk within 5-10 minutes where in many people died. And allowing the boat to be overloaded with people, that is why there was negligence on the part of the owner and not only to the negligence of the captain... That is why the limited liability rule will no longer apply in this case.

Limited liability rule: Vessel, appearance, freight and insurance

It does not violate the civil code.

In order to avail limited liability in partial loss there must be a written notice of abandonment. That the owner is turning over to the predator possessor of the thing or abandoning the vessel.

Principle of Limited liability rule (LLR): no vessel, no liability...

Is there a need of abandonment? No there is no need because there is nothing to abandon.

Exception of LLR:

If there is a concurrence of owner or agent of the vessel

In case if the vessel is insured

The nature of the claim is in special law that the workers who died in the performance of their duties. It is Workmens compensation claim.

When all the expenses for repair incurred prior to the voyage, because there was obligation already arise.

The freight that was paid will not be included in the LLR. It is only the value of the vessel will be extinguished.

Protests:

Within 24hrs

Or to the first point of entry in the Philippines

It is not applicable to all case... Only if the vessel was shipwreck, hurricane, arrival under stress, in case of maritime collision (take note of this, because it involves maritime vessels and it should be both maritime vessel)

Where to file? In 1981, the jurisdiction is regarding to the amount involved

In Metro Manila: RTC exceeds 400k

Outside MM: RTC- exceeds 300k

Below this amount above stated: will in Metropolitan Trial Court.

Maritime Collision- there is a need to protest

Vessel any barge, lighter, bulk vessel, freighter, passenger freighter, tanker, fishing boats, contrabands... design and capable of transporting person or cargo from one coast to another.

Not vessel: If the vessel is operated under Arm forces of the Philippines, all foreign , Bangka, sailing boats, less than 3 gross tons, boats that are accessory, yachts, health service, floating store houses

Requisites of maritime vessel:

1 Not accessory

2 Has a license to engage in the transportation

3 Using to transport crates or people by sea

Under code of commerce Art.835 regarding the person capability to protest and that it should be both maritime vessels.

Registration and extraordinary diligence

Vessel is personal property. It is registered with conveyance and customs

MARINA RULES IN REGISTRATION- it is the one who set the rules

How to acquire? Good faith with valid title: 3yrs

GF without valid title with adverse possession: 10 yrs

Through sale

Can you sell a vessel while in voyage? Yes

Who will pay the payment of wages? Purchaser

Who will collect the freight earn? Pertains to purchaser

Can you sell a vessel when you reach in the San Francisco or destination? Yes

Who will collect? The Seller because he already finished the transaction

Who will pay the wages? Seller

Who will abandon the ship? The ship owner or agent but not the chartered.. Co-owner can abandon it only in proportion of his share.

All vessels must be registered.

What are the vessels need to be registered?

Owned by the Philippine citizen or Phil. Companies that atleast 60% owned by Phil. Citizen

More 15 gross tons in capacity

Optional registration: 15 tons or less

Not required: war vessels, boats of private 3 tons or less, non-motorize boats,

Temporary certificate:

May be given incase of charter or Marina

Charter must not be less than 1yr.. operation entirely by Filipino citizens and man by Filipino citizens

When can you delete/cancel the registration?

Phil.; incase of bare boat chartered by a foreign

Pre-termination of chartered agreement

Sale of the vessel to a foreigner

Scrapping or decommission of the vessel (no longer to be used)

Constructive or total loss

Transpo Lecture- Jan 7

Charter Party - a special contract in maritime commerce. It is not the contracting parties but the contract itself. It is a contract by which the owner or agent of the vessel leases the whole or part of the vessel to another for transportation of the cargo or passengers from one place to another for a certain price.

Governing laws:

Common Carrier- civil code

Private Carrier- Code of Commerce

The moment CC becomes a private carrier- Code of Commerce

Importance of determining whether common carrier is considered a private carrier:

1. To know which law will govern

2. Stipulation that limits liability is valid in a private carrier but not in a common carrier.

When is a common carrier considered as private carrier? BARE BOAT CHARTER

BARE BOAT CHARTER

It is when a vessel is hired (including the crew and everything). The control, management, and possession is with the charterer.

Article 652 of the code of commerce: Contents and formalities of the chartered parties

1. The charter parties has to be drawn in duplicates, signed by the parties.

2. Charter parties should also specify:

* the kind, the name, and the tonnage of the vessel.

* the origin of registry of the vessel.

* The name of the shipper, the owner, and the charterer.

* Port of loading and unloading.

* Capacity and the carriage agreed upon by the parties to be loaded.

* The freightage

* the primage

* lay days.

Freight-fare or kind of cargo to be loaded

Primage- fee given for the special care given to the cargo or by using the equipment

Lay days- allowable number of days that a charterer may load or unload the cargo

Why is this important to know?

Because we are dealing with cargoes and vessels, and they are always in transit and delay would cause a lot of money for additional charge for demorage

Demorage- fee charged in excess of the number of days allowed to load and unload

Requisites for a valid charter party:

1. Consent of the contracting parties

2. Existence of the vessel at the disposal of the charterer

3. Stipulation as to the freightage

4. Compliance with Art. 652 o the Code of Commerce

What is the indication of Art 652- the charter party has to be in writing as general rule

EXP: Art 653, if the cargoes be received and the charter party has not yet been signed then it is understood that it has been executed and the one that will govern the obligation of the parties are the stipulations in the bill of lading

Kinds of Charter Party:

1. Bare Boat Charter Party or Demise Charter Party

a person hires the vessel and the crew, and so the charterer would be the one who would take charge in paying the wages of the crew and in control of provisioning everything in the vessel, in effect, the crew became the employees of the charterer

charterer party would be liable to third persons

charterer has command, possession and navigation of the vessel; he acts as owner who handles everything

only instance where common carrier would be a private carrier

2. Contract of Afreightment charterer hires the vessel either for a deteminate period of time or per voyage or successive voyages

a. Voyage Charter per voyage or successive voyages

b. Time Voyage fixed time

Contract of Towage ( contract of service where the barge is towed by a vessel

Can a ship captain enter a charter party?

Art. 655, the ship captain can enter a charter party provided, in the absence of a ship agent, even if it is in contravention or against the instruction of the ship agent or owner still valid

But the owner may go against the ship captain for damages

Art. 656 as to determine when demorage shall be given

if there is no time stipulated in the charter party then the usage of the port shall be used

What if during the chartering, the vessel was found later on not seaworthy anymore?

Art 657, the captain is obligated to look for a vessel and continue the voyage within 150 kilometers from port

If the captain cant find vessel to deliver he may apply for deposit of the cargo

Art 658, the freight shall accrue as stipulated in the contract. But if the stipulation is not clear, the rule will be, if on the charter there is a month or a date, then the freight will accrue during the time of the loading. If there is a fixed period, then the fright accrues on that very date.

Art 659-if the cargoes are placed on the vessel, the captain may sell the cargos subject to the following conditions:

1. if the money from the sale will be needed for the repair of the problem of the vessel.

2. Unavoidable and urgent expenses

Effect-( if after the repair, the cargo was able to reach the point of destination, then the captain will pay the owner based on the price in the place of destination. Same goes with if the vessel did not reach the destination.

Will the cargo be liable for the freight? If the vessel was not able to reach the destination, its liability shall be proportionate to the distance. If it reaches the destination, it will be liable for the whole value.

Art. 659- partial freight

if the vessel was lost or did not reach the destination.

Art. 662- shipwreck but cargo was recovered= liable only up to the extent of the damage (partial freight)

Art. 665 the moment the cargo is placed in the vessel, the common carrier is already liable. There is already a lien created in the cargo.

What are the liabilities?

Freight

Expenses

Average (expense that inure to the benefit of cargo holders) accorded to him. Ex: Jettison.

If you cannot pay the liabilities, then under

Art 668 the cargos be sold in the auction. Cargos to be sold in auction by the captain:

cargos under 665 and 666

if the cargo is at the risk of deteriorating

consignee cannot be found or refuses to claim the cargo

if it is very expensive to preserve the cargo.

Instances where cargo is liable for full freight: art 659

The cargo was sold for the repair, and the vessel reached the destination.

Under 662, when the vessel was repaired but after the repair the cargo was not sold and the vessel reached the destination.

Under 663, deterioration due to packing

Fortuitous event

When not required to pay a freight?

Under 661, when for reasons of shipwreck or stranding, or when the goods were confiscated by enemies or pirates.

Under 660, when the cargo was thrown overboard and was never recovered. (jettison)

Transpo Lecture Loan on Respondentia and Bottomry (January 28, 2011 / January 2015)LOAN ON RESPONDENTIA AND BOTTOMRY it is a contract of loan in the nature of mortgage

subject matter in RESPONDENTIA: Cargo || BOTTOMRY: Vessel

there should be marine risk

unlike other loans, may assume higher interest and not covered by any regulation or usury law because of the risk the lender is taking the moment the vessel goes on voyage

obligation is paid only if the subject matter is lost (respondentia), or extinguishment of obligation to pay when lost (bottomry), so when payment should be made at all costs, then it is an ordinary loan

Loan on BottomryLoan on Respondentia

Definition Loan made by ship owner or ship agent guaranteed by vessel itself and repayable upon arrival of the vessel at destination Loan taken on security of the cargo laden on a vessel, and repayable upon safe arrival of cargo at destination

Who may contract? Ship owner

Ship agent

Outside of the residence of the owners - captain Owner of the cargo

Common ElementsElements

Exposure of security to marine peril

Obligation of the debtor conditioned only upon safe arrival of the security at the point of destination

Forms

Public instrument

Policy signed by the contracting parties and the broker taking part therein

Private instrument

Contents

Kind, name and registry of vessel

Name, surname and domicile of the captain

Names, surnames and domiciles of the borrower and lender

Amount of the loan and the premium stipulated

Time for repayment

Goods pledged to secure repayment

Voyage during which the risk is run

LOB/LOR vs Simple Loan

LOR/LOBSimple Loan

Rate of interest is not subject to the usury law extraordinary risks involved Rate of interest must not exceed the ceiling fixed by the usury law

Marine risk is necessary and be duly established No need of such risk

Executed in accordance with the form and manner required in the code of commerce Formal requisites regarding contracts in general would apply

Recorded in the registry of vessels in order to bind third persons No registration is required

Preference is extended to the last lender theory that if not for the last lender, then the prior lenders would not have benefited from the preservation of the security. First lender enjoys preference (general rule)

Who has authority to constitute LOR / LOB

Loan on BottomryLoan on Respondentia

Ship owner - may secure a lon upon his ship

Part Owner may secure a contract only up to the extent of his interest in the vessel

Ship Captain & Part Owner may obtain a loan only to the extent of his interest

Ship Captain (NOT Owner)

1. Extreme necessity may borrow by means of LOB in order to comply with the obligations

2. No loans may be made on the salaries of the crew nor of the profits which may be expected

Cargo owner have the right to enter into a LOR

Captain - NOT owner of cargo thus they cannot contract a LOR. If he does such then he shall be chargeable solely for the LOR.

WHAT DOES LOR/LOB COVER?

GR: it is presumed that LOR or LOB covers round trip

EXP: when it is expressly stipulated that a particular trip is covered by loan

REQUIRED TO REGISTER VESSEL TO AFFECT LOR/LOB?

Should be recorded in the registry of vessel, but failure to register the same does not invalidate the contract Effect of the non-recording ( it will not bind third parties and you will lose as a lender, your preference of credit (note: LOB or LOR has preference of credit over ordinary loans)Loan of Respondentia: (for MARINE PERILS ONLY)

GR: When cargo is lost, then the LOR is extinguished ( the borrower will no longer pay the lender because the subject matter is lost

What if:

1. If cargo lost, vessel saved? Still liable? NOT liable, the security was saved

2. If cargo was saved, vessel lost? Still liable? LIABLE, security still existsLoan on Bottomry (for MARINE PERILS ONLY)

GR: When vessel is lost, then the LOB is extinguished ( the borrower will no longer pay the lender because the subject matter is lost

What if

1. If cargo lost, vessel saved? Still liable? LIABLE, security still exists

2. If cargo was saved, vessel lost? Still liable? - NOT liable, the security was saved

EXCEPTION TO THE GENERAL RULE ON EXTINGUISHMENT UPON LOSS OF THE CARGO/VESSEL1. if the loss is caused by the inherent defect of the cargo

2. fault of borrower himself

3. Barratry or malice on the part of the captain of the vessel

4. If the damage was caused because the borrower was engaging in contraband goods

5. If the goods loaded were different from that designated in the contract

RULE ON OBLIGATION: GENERAL AVERAGE RULE in obligation when it comes to General Average (expense on deterioration): incurred to save cargo or vessel by jettisoning ( owners and lender benefited from such

LENDER : GENERAL AVERAGE

Lender shall suffer or share in proportion to their respective interest in General Average which may take place in the goods in which the loan is made (Art. 732)Instances when the charterer will not pay freight anymore?

If goods were lost on account of:

1. Shipwreck or stranding

2. Due to seizure by pirates or enemies

If paid in advance then it shall be returned UNLESS there is an agreement to the contrary What if the captain sees that the ship is not seaworthy anymore? The captain has the responsibility to look for another ship within 150km. (Art 657)

Charges to Cargo? (Art 665)

Freightage

Expenses and duties arising therefrom

Part of the general average

EXAMPLE (GENERAL AVERAGE)1. Cargo worth 1M, loan on respondentia is 500k, General Average is 100k, How much should the lender pay? his interest is one half. Then he should pay 50k

2. in the case of shipwreck, and the vessel is stranded but some of the goods were salvaged or recovered, there is salvaging expenses in doing the same, What is the basis of determining the payment of the borrower? Not the original value of the loan. Law states that in shipwreck it is based on the value of the goods saved minus the expensed for salvaging or saving the same3. Cargo is worth 1M, salvaged cargo is worth 500k, salvaging expenses of 100k then 400k would be the basis of loan on respondentia and not 1M

Where goods or vessel is covered by insurance:

General Rule: if it is 100% covered by loan it cannot be covered by insurance because there is no more insurable interest on the part of the owner

EXception: Insurance and LOB/LOR may co-exist but there should be a determination of the insurable interest. How to determine? if the value of the goods or vessel is 1M and subject to LOB/LOR for 700k, How much is insurable interest of insurance company? 300k only

Is insurance company also liable in case of damage? Yes. Because it has interest in the subject matter

Insurance and loan Co exist

Once insurance and loan co-exist, both shall be liable for damages in proportion to their interest

Difference of Insurance and LOB/LOR:

InsuranceLOR/LOB

in case of loss, may be paid anytime in all events even without marine riskLOB/LOR: there should be the presence of marine risk; in case of loss, loan is extinguished

Preference of Credit

Ex. Series of loans were made = Manila ( Iloilo ( Cebu (100k) ( CDO; vessel not longer worthy to travel and so was sold for 110k

first to be paid in the loan made in Cebu (100k) then pay Iloilo (10k) dont proportionate anymore, pay everything that is left if the loan is bigger than the difference

last one has preference, because of the principle that the last loan incurred saved the cargo or vessel and so preference must be given since first loan also benefited Inverted Order

1. Loan contracted during voyage has preference over those contracted before the voyage

2. Loan contracted during last voyage take preference over earlier voyage

3. Different loans made on the same port shall be paid on a pro rate basis

Example:

Due to Fraud acquired a high loan than the actual amount of the goods secured

Transpo Lecture - Average and Collision (February 4, 2011)AVERAGE Expenses and damages of the vessel or to the cargo (ex. Extraordinary, accidental expenses, loss or deterioration) Who will shoulder loss in damages and expenses? Identify what kind of average first!

GR: nothing more than expenses and damages

EXP: Art. 806 ( technical meanings: 1. Average is all extraordinary and accidental expenses incurred during the voyage for the preservation of the vessel, cargo or both2. Average refers to damages and deterioration suffered by the vessel from the time it is put in sea until it arrives at the port of destination and also those suffered by the cargo from the time it is loaded to the vessel until it arrives in the place of destination for unloading

Art. 807

Petty and ordinary expenses or expenses incidental to navigation (pilotage, lighterage, inspection, health, maritime fee) should be borne by the owner of the ship because these are expenses in order to travel or have a voyage Important thing to determine is the kind of average because if it is an average then the next thing you should think of is who will bear the loss?

2 KINDS OF AVERAGEI. Simple or Particular Average expenses or damages to the vessel or her cargo which do not inure the common benefit of those who are interested; loss borne by the owner of the cargo or vessel itself;a. Art. 809: losses suffered by the cargo from the time of its embarkation until it is unloaded either by the inherent defect of the cargo or through force majeureb. wages and victuals or provisions of the workers ( depends whether the vessel is chartered on a fixed voyage or a monthly charter

During quarantine, wages and victuals are only Particular Averages

a. Damages inflicted upon the vessel or cargo by reason of impact or collision with another if it is accidental and inevitable

b. Damages suffered by the cargo through the fault or negligence of the captain of the vessel, the owner of cargo bears loss without prejudice in filing a case against the owner of the vessel

EXAMPLE:Ex: American corporation loaded equipment and agricultural machineries on a German vessel for Russia but during the voyage, a war brought out in Russia and Germany, so the vessel decided to go to Philippine port to seek refuge. Who would bear the expenses while in the Phils? General or Particular?

Particular only, the risk is not common (because of war, and so safety to the vessel only and not the cargo because the latter is a legal material, therefore, owner of vessel shall incur loss)

II. General or Gross Average- Art 811: expenses or losses deliberately incurred for the purpose of saving the vessel or cargo or both from real marine risk; not accidental

NOTES ON GENERAL & PARTICULAR

if monthly then wages and victuals of the crew for the reason that the vessel was detained, then General Average

if fixed voyage charter, only Particular Average

Magsaysay case: SC gave requisites of General Average (TAKE NOTE AND MEMORIZE)a. There must be a common risk which is certain and imminent

b. Part of the vessel or cargo or both is sacrificed deliberately

c. The sacrifice was successful

d. The expenses or damages should be incurred or inflicted after taking proper judicial steps; captain cannot do it discriminately

i. There must be an assembly of saving made with the captain

ii. Coming out with a resolution

iii. Resolution and minutes be entered in a log book stating reasons or basis of action or vote; although majority would not vote for the jettisoning of the cargoes, the captain has the last say or decision, but he would be accountable to the cargo owners

iv. Objects to be jettisoned should be identified in the log book and the injuries if kept on board

v. Within 24 hours upon arrival at the first port, the captain shall deliver a copy of the minutes to the judicial authority

The captains vote still prevail over the othersNO DELIBERATE INTENT TO THROW = Not General Average

if the cargo accidentally fell, vessel benefited because of weight loss which stabilized the same during the storm (incidental only), still no General Average because no deliberate sacrifice to save V or C or both

despite the cargo being jettisoned, the rest of the cargo still was destroyed, no General Average because sacrifice was not successful If vessel was saved because the cargos were jettisoned, voyage continued and another accident happened, saved cargoes were exposed again to marine risk and was also destroyed, but those destroyed cargoes were salvaged or saved because of previous jettisoning, owner of jettisoned cargo asked for contribution which is proper. How much is the basis of contribution? the cost of the cargo after it was salvaged less the salvage expenses

JETTISON throwing out of cargoes

you cannot jettison a cargo because of hearsay or speculative, there should be clear and imminent risk

Who directs the jettison? Captain

Hierarchy of Jettisoning Cargoes (first to last)

a. heavy, less valued cargoes which impels the maneuvering of the vessel

b. cargoes which deloads the upper deck, always beginning with the biggest weight and smallest value

Ex. On a fair weather, vessel was stranded, crew needed to do something to keep it afloat, incurred expenses or averages to keep afloat. Is it a General Average? No. Particular Average only because there was no common peril ( the weather was good. It only benefits the vessel and not the cargo. Only personal obligation on the part of the owner to continue the voyage.

Usually, General Average happens during the voyage but it also happens in the port.

Art. 817 or 818: when there are lots of vessels and a vessel caught fire then it was made to sink in order to save the others and it did together with her cargoes, is it considered General Average? Yes. Because it was deliberately made to save the other vessels and their cargoes

When the vessel was close to the port, and because it is shallow, some of the cargoes need to be unloaded to barges in preparation of a coming storm, in doing that there are expenses and there is a risk that those you unloaded would suffer from loss or deterioration. General Average? Yes. It is for the benefit of everybody. Vessel was saved, and so cargoes were saved because of jettisoning the same

COLLISION

an impact or sudden contact between the moving vessels, or one moving and another in stationary

applies only to maritime vessels ( fishing boats are not maritime vessels, not covered here

RULE: if in collision, a vessel is at fault and the other is not, and it is due to the negligence or want of skill of the captain, who will be liable for damages? -Owner of the vessel at fault

If both vessels are at fault ( each one will bear its own loss but as far as the cargoes are concerned, they are solidarily liable (plaintiff may file another for the whole amount of loss, and such person may ask for reimbursment) ( owner of cargoes may claim from any of the vessels

If the liability is not clear as to who is negligent ( same rule as when both are at fault

Vessel A has proximate negligence and Vessel B has contributory negligence only, who is liable? same rule when both are at fault because the proximate principle does not apply to maritime collision, it only applies in ordinary collision

What if Vessel A has the last clear chance to avoid the accident but it did not avail the same, liable? No. The principle of last clear chance is not applicable in maritime collision, considered as though both vessels are at fault

If it is caused by force majeure ( each owner of the vessels will bear its own loss, same rule as to the owners of cargoes

Zone of Time Collision (law governing)

a. Zone 1- all the time up to the time when the risk starts

b. Zone 2- when the risk starts up to the time the risk is particularly certain to happen

c. Zone 3- when collision is certain up to the time the collision happened

Only in Zone 3, the vessel was about to collide and it is inevitable that they have to collide, the privileged vessel swerved to the right but there was another vessel on its right and so it also swerved. Who is liable? the one who caused the privileged vessel to cause such error or swerving (error in extremis)

In Zone 1 and 2, the one who made an error should be the one liable

In Manila, the vessel arrives to port, captain would delegate the anchoring and positioning to a pilot because he is more eligible in maneuvering big vessels

If accident happens during the maneuvering of the pilot, is captain still liable? Yes. But captain has recourse against the pilot. Because the captain is still there to ensure that maneuvering is done properly

GR: Protest is always needed in maritime collision. No damages without protest. Given within 24 hours at the place of collision or at the port of destination. (condition precedent)

Other instances wherein Protests are needed before filing for reconveyance: needed only in maritime vessels

a. arrival and distress

b. shipwreck

c. collision

d. when the vessel has gone through a hurricane

contributory negligence NOT APPLICABLE both are still at fault

EXP: Case: Ferry carrying passengers to Iloilo. There is a small vessel carrying passengers to the Ferry. Due to the fault of the one handling the small vessel, it went near the propeller of the ferry and so it sunk and one of the passengers was severely injured. They filed a case against the vessel but the latter argued that case would not prosper because there was no protest. ( SC ruled that protest is not needed when there is injuries to persons or passengers and what was involved is not a maritime vessel since it is only a small vessel

Other EXPs:

a. the one involved (cargo) is not on board the vessel

b. the person involved is not in the capacity to make the protest (applicable also in the said case because the victim was in the hospital for 6 months)

c. the means used is not a maritime vessel

TRANSPO LECTURE: February 18

Arrival under stress and ShipwreckIf the common carrier (cc) is bound to travel, the route stipulated shall not be violated. Otherwise, there will be deviation. If there is deviation, cc will be liable even if loss or damage was due to a fortuitous event. It is the same thing with delay.

In arrival under stress, vessel does not reach its destination. It anchors to the nearest port or most convenient port. This is not considered deviation.

Valid reasons for Arrival under stress

1. Well founded fear of seizure by priviteer or pirates

2. Accident at sea disabling the vessel to continue voyage

If it is an arrival under stress, CC will not be liable for the damages suffered by the cargo/ vessel. If it is not a legitimate arrival under stress, ship owner will suffer the damage as to the vessel; and cargo owner as to the cargo.

Even the presence of valid reasons will not automatically mean an arrival under stress because there are formalities that must be observed.

Steps to be taken to determine the propriety of arrival under stress: (MEMORIZE)1. Determination must be made by the Captain

2. Summon all officers and those who have interest over the vessel; but the latter have no voting rights

3. Deliberation and objections

4. In case there will be disagreements, decision of the captain will still prevail

Instances when arrival under stress is not valid:

1. If the lack of provision is caused by failure of the captain to observe the usage and the customs of the particular place, and the distance of the voyage.

2. No well-founded fear of seizure by pirates and priviteer

3. Vessel is defective caused by the fact that it was not maintained nor repaired prior to the voyage.

Article 822: The scenario is that there is a need to repair the vessel but the cargo is already loaded. The cargo should be unloaded from the vessel. Who will shoulder the expenses?

The owner of the vessel if the purpose is to preserve the vessel.

If the purpose is to protect the cargo=the owner of the cargo.

If the reason is for both= both of them proportionally

Article 823: Custody of the cargo after temporarily unloaded is still under the captain, which makes him liable in case of damages or loss. (EXCEPTION: if due to force majeure)If the cargo was already damaged (partly or wholly), the captain has to apply in the proper judicial authority for the sale of the cargo. In order to effect the sale, captain must comply with certain formalities such as publishing, acquiring consent from persons who have interests over the cargoes.

The captain shall be responsible for delay. If the cause of arrival under stress has ceased, he shall continue with the voyage. If he does not continue, then there is delay.

What should the captain do after the reasons for AUS ceases to exists

After the fear already ceases the captain shall decide after following the steps (stepsdetermine the propriety) Then he shall continue the voyage. Upon delay the captain shall be liable (823)Shipwreck

Injuries or loss suffered by the vessel because of the swallowing by the waves, or grounding or running an object in the sea, rendering it incapable for navigation.

Who will shoulder the damages?

1. Ship owner as to the vessel; 2. Cargo owner as to the cargo

assuming that there was no malice, negligence, lack of foresight, or lack of skill on the part of the captain. Otherwise, indemnity may be demanded from him.

Captain will be personally liable if:

1. there is malice, negligence, lack of foresight, lack of skill

the vessel that was put to sea was insufficiently repaired.

ShipwreckArrival Under Stress

Grounds1. swallowing of waves

2. grounding or running an object in the sea (marine perils)1. Well founded fear of seizure by privateer or pirates

2. Accident at sea disabling the vessel to continue voyage

Circumstance vesselShip is stranded thus not navigableShip is navigable but due to circumstances it limits the movement of the ship

Liability Shouldered by the individual ownersGR: Shouldered by owner/agent (expenses for arrival NOT for damages)

TRANSPO LECTURE: February 25 SALVAGE LAW and COGSASalvage Law

Salvage- Saving the vessel and saving the cargo

Contract or service which one person renders to the owner of the ship or goods, that by his own labor it preserves the goods or ship, which the owner or those entrusted with the care of them either abandon, or during distress at sea, were not able to protect them.

Exception to DEVIATION

When is salvage necessary? If there is a derelict-- cargo or vessel has been abandoned by the captain and the crew, without intention of recovering the same or when safety is already beyond their control. If there is till intention to recover, it is not considered a derelict.

It can be a subject to salvage if it is a derelict

Derelict: abandonment + no intent to recover

NOTE: intention to recover must be from the beginning

Example: If the crew abandoned the ship and had originally not intent to recover but later on when they arrive on the shore they saw useful items to help in salvaging. Thus they decided to return, upon returning they saw salvager. In this case the ship was already considered derelict since intent must be from the time the ship circumstance for abandonment happened. Salvage in this case is valid. QUASI DERELICT vessel is not valid but it is already beyond the power of the crew to save (ex: vessel is already at the mercy of the sea)

What are the subjects of salvage?

1. Vessel itself

2. Jettisoned

3. Goods floating at the sea

4. Laigon- goods attached to the buoy

Jetsam and Flotsam unless abandoned still the property of their original owners

1. Jetsam goods that were thrown off a ship which was in danger

2. Flotsam are goods that floated off the ship while the ship was in danger or when it sank

3. Ligan goods left at sea on the wreck or tied to a buoy so that they can be recovered laterWhat is the nature of the possession of the finder of derelict?

The finder has possession but not ownership. Even the owner may take back the derelict without paying the expenses of salvage.

Finder has the right to keep the derelict until the owner posts a bond. (salvage lien)Elements of valid salvage:

1. marine peril

2. service is voluntary

3. successful in whole or in part

4. vessel is abandoned

Liability: Valid and Invalid Salvage

Valid SalvageInvalid Salvage

Common Carrier not liable for damages (if they followed the formalities stated in the law)Liability of damages

3. vessel shipowner

4. cargo - cargo owner

Expenses for the Salvage shipowner / shipagent receive compensation by way of rewardSued for damages (captain/agent)

Examples:

Vessel is floating in distress, beyond the control of the crew, then one swimmer a member of the crew, was able to save cargoes. Is he entitled to reward? No, because it has to be done voluntarily. He is a crew, and it is part of his duty to save the cargo. Actual case: M/V Alfonso owned by William Lines was giving distress signals. The engine stopped causing the vessel to drift away. The weather was perfectly fine. Capt. Barios, captain of another vessel M/V Henry, responded to the signals and towed the vessel to a safer place and the vessel was saved. William Lines waived renumeration. Capt. Barios filed a case for a salvage reward. Is he entitled to a reward? Court said that there is no marine peril. (Barrios vs Go Thong) He, who shall save merchandise at sea, has the obligation to deliver it to the collector of custom or treasurer or mayor. Otherwise, he can be held criminally liable or will not be rewarded salvage fee.

Contract of towage vs. salvage

SalvageTowage

Towing in order to that it may be considered salvage unless all requisites of salvage concurTowing may be an act of salvaging

all the crew of the vessel who undertook the salvage will receive a rewardIn towage, they will not a receive a reward, only their salaries (fees belong to the owner of the tugboat)

Requires success, otherwise no paymentSuccess is not required

Vessel must be involved in an accidentVessel need not be involved in an accident

How to determine the bond to be posted?

Customs or the judge of the RTC where the goods where recovered will be the one to determine the amount of bond.

Obligation of collector of custom

1. safeguard and inventory of goods

2. subject the goods to public auction if the conservation is prejudicial to the owner and when no objection was made.

a. advertisement (30 days after salvage)

People who cannot validly conduct salvage

1. Crew of the vessel shipwrecked or salvaged. (he has a duty to take care and save the cargo)2. If there was an objection by the captain, the person still insists.

3. If the person who salvaged did not deposit it to the collector of customs.

How much salvaged to be given will be based on:

1. Labor

2. Competence and Skill

3. Value of the materials being used to salvaged

4. Risk being assumed

5. Value of the goods being salvaged

Salvage reward must not exceed 50% of the value of the goods salvaged.

Things that have to be paid by the owner:

Expenses for custody

Advertisement

auction sale

taxes over the goods when it was brought to the country

expenses for salvage

salvage reward

If the one who salvaged sought for the help of another vessel but the shipowner was not there, then 50% of the salvage fee will go to the owner, 25% will go to the captain, another 25% will go to the crew of the vessel. (Sec 13 Act No 2616 Salvage Law)No claim 3 months after publication by the authorities of salvage report the things saved shall be sold at a public auction, proceeds of which shall be deposited in the National Treasury after deducting the expenses and the proper reward to which the salvor is entitled.No claim after 3 years of the deposit

50/50 - half of the proceeds will go to the finder and half will go to the government.

COGSA Carriage of Goods by Sea Act (enacted by US Govt. Act. 521, 1936)Primary Law that will govern transportation by sea is the Civil Code. Why Civil Code? Latest law will be the governing law.

COGSA is suppletory. In international shipment, COGSA could be the primary law, if it was stipulated by the parties. Note that it does not apply to coastwise shipment even if it was stipulated.

Responsibilities and liabilities of parties

Implied warranty of the ships seaworthiness

When the cargo was loaded to the vessel, it is presumed that it is seaworthy. The owner of cargo does not have the obligation to check or validate its seaworthiness.

Recovery of loss or damage

There should be notice of damage. Common carrier has to file the notice of damage immediately upon the receipt of goods if the damage is apparent. If it is not apparent, it should be filed within 3 days.

Effect if there is no notice of damage: presumption (ONLY) that the goods delivered are in the same condition as it appeared in the bill of lading. Thus, a case of recovery of loss or recovery filed beyond three days will still prosper.

Supposing in the bill of lading it was stated that primary law is COGSA, and it was stipulated that no case will prosper unless the notice is filed within 30 days. Is it valid? No because under COGSA, notice shall only be filed within 3 days.

What if it was stipulated that before the case must prosper notice within 3 days must be filed. Is it valid? No because notice is not a prerequisite to be able to file a case.

Case for recovery of loss or damage AGAINST THE VESSEL shall be filed within one year from delivery. Except in cases of loss or damage because of misdelivery and conversion, which under 1144 of the Civil Code, the prescriptive period is 10 years. Filing within one year period may be extended if there is agreement between the parties.

A case has been filed in December 18, 1972. Claim for damages was filed in May 4, 1973. Does the action prescribe if there was a filing of extrajudicial demand in May 4, 1972? No. The moment extrajudicial demand was filed, it interrupts the prescriptive period. Prescriptive period will then again start on May 4, 1972 and not December 18, 1972.

Supposing A insured his cargo to B insurance company. Cargo arrived in 2009 in the Philippines and there were damages. A filed a demand letter to B, but the latter did not respond to the demand. So three years after, he filed for a case against B. B invokes prescription of action. Is B correct? NO, B is not correct because As claim is against an insurance company and not the vessel. According to the Insurance Code, the prescriptive period for money claims is 10 years.

TRANSPO: March 11 FINAL REVIEWParties:

Shipper vs Passenger

Common Carrier vs Consignee

Laws governing conduct of transportation:

1. In coastwise shipping: Civil Law, Code of Commerce, Special Laws

2. International Shipping: Law of the particular country where the goods are to be delivered

COGSA: Carriage of Goods by Sea Act

From abroad to the Phil- civil code; code of commerce; COGSA (primary if stipulated)

COGSA- General Rule: Only for international shipment (not for coastwise)

Exception: when there is a stipulated transshipment

Ex: from San Francisco-Cebu (There was a stipulation that COGSA will apply)-then the vessel ducted in Manila. Then COGSA will still apply.

Note: transshipment is not valid unless stipulated.

3. Land transportation: Civil Code and code of commerce

4. Air transportation: Civil Code and Code of commerce (local); or Warsaw Convention (international) especially when the parties are highly contracting parties. If the flight is from a country that the parties are not highly contractingWarsaw convention will not apply.

Obligations of common carrierA. General rule: accept goods and passenger without discrimination

Exception: 1. If the goods are contraband.

2.livestock exposed to diseases

3.subject to capture, accepting the passenger or goods will result to overloading. (pls refer to the civil code)

B. Deliver the goods/ Transport the passengers

Where? in the place stipulated in the bill of lading. When? Reasonable time. To whom? Authorized person, consignee. How? Delivery must be done without delay.

C. Exercise extraordinary diligence

Sea transportation- the vessel must be seaworthy (fit, properly manned, adequately equipped) cargo-worthy.

In transportation of passengers, common carrier must observe safety as far as human care and foresight can provide.

Coverage of observance of extraordinary diligence:

It starts from the time the goods are unconditionally placed in the possession of the common carrier and accepted by the same; and delivered actually or constructively to the consignee or authorized person. (Notice of delivery is important)

General Rule: Even if the goods are temporarily unloaded, extraordinary diligence must still be observed. Exception: stoppage in transitu (right of the creditor to stop the transportation).

Defenses of the common carrier:

1. Article 1734 of the Civil Code

For Force Majeure to be considered to be a valid defense it must be the proximate cause. Common carrier must have exercised due diligence before, during, and after. Also, that common carrier did not incur delay and overloading.

2.Defective packing of cargo

The moment the common carrier accepts the defective packing of the cargo, it already assumes liability. Except when it has done something to prevent or forestall damages.

Special Contracts

Charter party

1.Bare boat/ demise

-provide for the crew, including their salaries

-responsible to pay damages

2. Contract of Afreightment

time charter and voyage charter

Liabilities of common carrier

1. Transportation of cargoes

Stipulation as to the liability is valid: must be in writing, must be reasonable, must be for a consideration other than the freight.

2. Transportation of passengers

Generally, limiting the liability is void except for gratuitous passenger. Exception to the exception: if there is negligence but not for gross negligence or willful act.

*If the person is not a passengerthen CC is not liable. Basis: contract of carriage.

Obligation to conduct inspection

1. Land: visible only to the naked eye unless there is imminent danger or strong suspicion

2. Airline: it is a must

Law on bottomry (vessel) and respondentia (cargo)

-A loan, payment of which is subject to marine risk

-If the cargo or vessel is safe then the debtor is obligated to pay.

-If there is no stipulation then it is presumed that it is a roundtrip risk.

* Loan more than the value of the cargo or vessel through fraud is still valid but only up to the amount of the cargo or vessel.

Order of payment

-Those transactions made during the voyage has preference than those made before the boat was put into voyage.

-Inverse preference.

-Those loans taken in the same place and time during the shipwreck, the debtors will share payment pro rata.

Shipwreck

- Without malice of the cc, expenses shall be borne by the ship owner. There should be a protest.

-Vessel, common carrier, cargo owner shall bear the loss. Captain shall be liable if there is malice, negligence, and the vessel was insufficiently repaired.

Salvage - saving the cargo

Requisites:

1. Marine risk

2. Voluntary

3. Successful

4. Abandoned or beyond the control

When? If the shipment is derilict OR If the vessel is already abandoned (totally).

Average

General- inures to the benefit of everyone. All who benefited must share to pay the expenses.

Special/Particular- expense inures only to the benefit of a particular person.

COGSA

-Applies to International voyage.

-Applies to local if there is stipulated transshipment.

-Implied Warranty

* If the damage is apparent, notice of damage must be filed. Not apparent=notice of damage must be filed within 3 days.

* Failure to file within 3 days does not bar one to file a case. The purpose of the notice is to show that there was damage. If it was not filed, then there is a presumption that the cargo was received in the same condition as it was loaded.

* Must be filed within 1 year even without notice of damage in case of Common Carrier. If filing for recovery for damage against insurance company, the prescription period is 10 years.

LOAN

MANILA Php 20,000

ILOILO - Php 10,000

CEBU - Php 100,000

VESSEL SOLD IN AN AUCTION:

CDO- Php 110,000

APPLYING RULE: CEBU ( ILOILO( MANILA

Loan Php 70M

Actual Value Php 50M

Then Php 50M shall be a valid loan but the Php20M will be converted into a simple loan