MARITIME COMMERCE (Arts.

573-869)
MARITIME/ADMIRALTY LAW
It is the system of laws which particularly relates to the
affairs and business of the sea, to ships, their crews and
navigation, and to maritime conveyance of persons and
property. (Notes and Cases on the Law on Transportation
and Public Utilities, Aquino & Hernando, citing Francisco,
p.254)
Maritime laws apply only to maritime trade and sea
voyages. (Pandect of Commercial Law and Jurisprudence,
Justice Jose Vitug, 1997 ed.)
Arrastre service is not maritime in character. It refers to a
contract for the unloading of goods from a vessel. (ICTSI
vs. Prudential Guarantee, 320 SCRA 244)
CHARACTERISTICS OF MARITIME TRANSACTION
1. Real - similar to transactions over real property with
respect to effectivity against third persons which is done
through registration. (Rubiso vs. Rivera, 37 Phil. 72). The
evidence of real nature is shown by: 1) the limitation of the
liability of the agents to the actual value of the vessel and
the freight money; and 2) the right to retain the cargo and
embargo and detention of the vessel (Luzon Stevedoring
Corp v. CA, 156 SCRA 169);
2. Hypothecary - the liability of the owner of the value of the
vessel is limited to the vessel itself (Doctrine of Limited
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 stands as the guaranty for their settlement.
(Aboitiz Shipping Corp. vs. General Accident Fire and Life
Assurance Corp. 217 SCRA 359).
VESSEL
-any barge, lighter, bulk carrier, passenger ship freighter,
tanker, container ship, fishing boats or other artificial
contrivance utilizing any source of motive power, designed,
used or capable of being used as a means of water
transportation operating either as common contract carrier,
including fishing vessels covered under PD 43
MERCHANT VESSEL
Vessel engaged in maritime commerce, whether foreign
or otherwise. (Bar Review Materials in Commercial Law,
Jorge Miravite, 2002 ed.)
Constitutes property which may be acquired and
transferred by any of the means recognized by law. They
shall continue to be considered as personal property. (Arts.
573, 585)
They are susceptible to maritime liens such as for the
repair, equipping and provisioning of the vessel in the
preparation of a voyage, as well as mortgage liabilities, in
satisfaction of which a vessel may be validly arrested and
sold. (Ship Mortgage Decree of 1978)
MARITIME LIEN
It constitutes a present right of property in the ship, a jus
in re, to be afterward enforced in admiralty by process in
rem. (PNB vs. CA, 337 SCRA 381)
If the maritime lien arose prior to the recording of a
preferred mortgage, it shall have priority over the said
mortgage lien. (PNB vs. CA, 337 SCRA 381)

ORDER OF PREFERENCE IN CASE OF SALE OF

VESSEL
R.A. 6106

P.D. 1521

Effectivity date
1969

1978

Applicability
Overseas shipping only

Both domestic and overseas

shipping

Kind of sale
Judicial

Judicial and extrajudicial

Order of Preference
A preferred mortgage
shall have priority over all
claims against the vessel,
except the following
preferences in the order
stated:
1. Judicial costs of the
proceedings;
2. Taxes due the
Philippine Government;
3. Salaries and wages of
the Captain and Crew of
the vessel during its last
voyage;
4. General average or
salvage including contract
salvage, bottomry loans,
and indemnity due
shippers for the value of
goods transported but
which were not delivered
to the consignee;
5. Costs of repair and
equipment of the vessel,
and provisioning of food,
supplies and fuel during
its last voyage; and
6. Preferred mortgages
registered prior in time.

The preferred mortgage lien

shall have priority over all
claims against the vessel,
except the following
preferences in the order
stated:
1. Expenses and fees
allowed and costs taxed by
the court and taxes due to
the Government;
2. Crews wages;
3. General average;
4. Salvage, including
contract salvage;
5. Maritime liens arising prior
in time to the recording of the
preferred mortgage;
6. Damages arising out of
tort; and
7. Preferred mortgage
registered prior in time.

Effect of sale: All pre-existing claims in the vessel are

terminated. They will then be satisfied from the proceeds of
the sale subject to the order of preference.
DOCTRINE OF LIMITED LIABILITY
(HYPOTHECARY RULE)
Cases where applicable:
1. Art. 587 civil liability for indemnities to third
persons
2. Art. 590 indemnities from negligent acts of the
captain (not the shipowner or ship agent)
3. Art. 837 collision
4. Art. 643 liability for wages of the captain and the
crew and for advances made by the ship agent if
the vessel is lost by shipwreck or capture
GENERAL RULE: The liability of shipowner and ship agent
is limited to the amount of interest in said vessel such that
where vessel is entirely lost, the obligation is extinguished.
(Luzon Stevedoring v. Escano, 156 SCRA 169) The interest
extends to: 1) the vessel itself; 2) equipments; 3) freightage;
and 4) insurance proceeds. (Chua v. IAC, 166 SCRA 183)

 EXCEPTIONS:
1. Claims under Workmens Compensation (Abueg
vs. San Diego 77 Phil 730);
2. Injury or damage due to shipowner or to the
concurring negligence of the shipowner and the
captain;
3. The vessel is insured (Vasquez vs. CA 138 SCRA
553).
4. Expenses for repair on vessel completed before
loss;
5. In case there is no total loss and the vessel is not
abandoned;
6. Collision between two negligent vessels;
Abandonment of the vessel is necessary to limit the
liability of the shipowner. The only instance were
abandonment is dispensed with is when the vessel is
entirely lost (Luzon Stevedoring vs. CA 156 SCRA 169).
RIGHT OF SHIPOWNER OR SHIP AGENT TO ABANDON
VESSEL
Instances:
1. In case of civil liability from indemnities to third
persons (Art. 587);
2. In case of leakage of at least of the contents of
a cargo containing liquids (Art. 687); and
3. In case of constructive loss of the vessel (Sec.
138, Insurance Code).
RIGHT OF ABANDONMENT
SHIPOWNER OR SHIP
AGENT

Goods shipped

Instances
1. In case of civil liability
from indemnities to third
persons (Art. 587);
2. Sec. 138, Insurance
Code;
3. In case of leakage of at
least of the contents of
a cargo containing liquids
(Art. 687)

1. Partial non-delivery,
where the goods are
useless without the others
(Art. 363);
2. Goods are rendered
useless for sale or
consumption for the
purposes for which they are
properly destined (Art. 365);
and
3. In case of delay through
the fault of the carrier (Art.
371).

Effects
1.

2.

Transfer of
ownership of the
vessel from the
shipowner to the
shippers or
insurer.
In case of (2),
the insurer must
pay the insured
as if there was
actual total loss
of the vessel.

Prohibition to receive cargo at destination;

Embargo;
Inability of the vessel to navigate. (Art. 640)

Terms:
1. Interdiction of commerce A governmental
prohibition of commercial intercourse intended to
bring about an entire cessation for the time being
of all trade whatever.
2. Blockade A sort of circumvallation of a place by
which all foreign connection and correspondence
is, as far as human power can effect it, to be cut
off.
3. Embargo A proclamation or order of a state,
usually issued in time of war or threatened
hostilities, prohibiting the departure of ships or
goods from some or all the ports of such state
until further order.
PARTICIPANTS IN MARITIME COMMERCE
A. Shipowners and ship agents
B. Captains and masters of the vessel
C. Officers and crew of the vessel
D. Supercargoes
E. Pilot
A. SHIPOWNERS AND SHIP AGENTS
Shipowner (proprietario)
Person who 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.

CONSIGNEE

What may be abandoned

Vessel

3.
4.
5.

1.

2.

Transfer of
ownership on the
goods from the
shipper to the
carrier.
Carrier should pay
the shipper the
market value of
the goods at the
point of
destination.

CAUSES OF REVOCATION OF VOYAGE

1. War or interdiction of commerce;
2. Blockade;

Ship agent (naviero)

Person entrusted with provisioning and representing the
vessel in the port in which it may be found; also includes the
shipowner.
Not a mere agent under civil law; he is solidarily liable
with the ship owner.
Powers and functions:
1. Capacity to trade;
2. Discharge duties of the captain, subject to Art.609;
3. Contract in the name of the owners with respect to
repairs, details of equipment, armament,
provisions of food and fuel, and freight of the
vessel, and all that relate to the requirements of
navigation;
4. Order a new voyage, make a new charter or
insure the vessel after obtaining authorization
from the shipowner or if granted in certificate of
appointment.
Civil Liabilities of the Shipowner And Ship Agent
1. All contracts of the captain, whether authorized or
not, to repair, equip and provision the vessel; (Art.
586)
2. Loss and damage to the goods loaded on the
vessel without prejudice to their right to free
themselves from liability by abandoning the vessel
to the creditors. (Art. 587)
Duty of Ship Agent to Discharge the Captain and
Members of the Crew
If the seamen contract is not for a definite period or
voyage, he may discharge them at his discretion. (Art. 603)
If for a definite period, he may not discharge them until
after the fulfillment of their contracts, except on the following
grounds:
a. Insubordination in serious matters;
b. Robbery;
c. Theft;
d. Habitual drunkenness;

e.

Damage caused to the vessel or to its cargo

through malice or manifest or proven negligence.
(Art. 605)

B. CAPTAINS AND MASTERS

They are the chiefs or commanders of ships.
The terms have the same meaning, but are particularly
used in accordance with the size of the vessel governed
and the scope of transportation, i.e., large and overseas,
and small and coastwise, respectively.
Nature of position (3-fold character):
1. General agent of the shipowner;
2. Technical director of the vessel;
3. Representative of the government of the country
under whose flag he navigates.
Qualifications:
1. Filipino citizen;
2. Legal capacity to contract;
3. Must have passed the required physical and
mental examinations required for licensing him as
such. (Art. 609)
Inherent powers:
1. Appoint crew in the absence of ship agent;
2. Command the crew and direct the vessel to its
port of destination;
3. Impose correctional punishment on those who,
while on board vessel, fail to comply with his
orders or are wanting in discipline;
4. Make contracts for the charter of vessel in the
absence of ship agent.
5. Supply, equip, and provision the vessel; and
6. Order repair of vessel to enable it to continue its
voyage. (Art. 610)
Sources of funds to comply with the inherent powers of
the captain (in successive order):
1. From the consignee of the vessel;
2. From the consignee of the cargo;
3. By drawing on the ship agent;
4. By a loan on bottomry;
5. By sale of part of the cargo. (Art. 611)
Duties:
1. Bring on board the proper certificate and
documents and a copy of the Code of Commerce;
2. Keep a Log Book, Accounting Book and Freight
Book;
3. Examine the ship before the voyage;
4. Stay on board during the loading and unloading of
the cargo;
5. Be on deck while leaving or entering the port;
6. Protest arrivals under stress and in case of
shipwreck;
7. Follow instructions of and render an accounting to
the ship agent;
8. Leave the vessel last in case of wreck;
9. Hold in custody properties left by deceased
passengers and crew members;
10. Comply with the requirements of customs, health,
etc. at the port of arrival;
11. Observe rules to avoid collision;
12. Demand a pilot while entering or leaving a port.
(Art. 612)
A ships captain must be accorded a reasonable measure
of discretionary authority to decide what the safety of the
ship and of its crew and cargo specifically requires on a
stipulated ocean voyage (Inter-Orient Maritime Enterprises
Inc. vs. CA).
No liability for the following:
1. Damages caused to the vessel or to the cargo by
force majeure;
2. Obligations contracted for the repair, equipment,
and provisioning of the vessel unless he has
expressly bound himself personally or has signed

a bill of exchange or promissory note in his name.

(Art. 620)
Solidary Liabilities of the Ship Agent/Shipowner for
Acts Done by the Captain towards Passengers and
Cargoes
1. Damages to vessel and to cargo due to lack of
skill and negligence;
2. Thefts and robberies of the crew;
3. Losses and fines for violation of laws;
4. Damages due to mutinies;
5. Damages due to misuse of power;
6. For deviations;
7. For arrivals under stress;
8. Damages due to non-observance of marine
regulations. (Art. 618)
C. OFFICERS AND CREW
1. Sailing Mate/First Mate
2. Second Mate
3. Engineers
4. Crew
No liability under the following circumstances:
1. If, before beginning voyage, captain attempts to
change it, or a naval war with the power to which
the vessel was destined occurs;
2. If a disease breaks out and be officially declared
an epidemic in the port of destination;
3. If the vessel should change owner or captain. (Art.
647)
Sailing Mate/First Mate
Second chief of the vessel who takes the place of the
captain in case of absence, sickness, or death and shall
assume all of his duties, powers and responsibilities. (Art.
627)
Duties:
1. Provide himself with maps and charts with
astronomical tables necessary for the discharge of
his duties;
2. Keep the Binnacle Book;
3. Change the course of the voyage on consultation
with the captain and the officers of the boat,
following the decision of the captain in case of
disagreement;
4. Responsible for all the damages caused to the
vessel and the cargo by reason of his negligence.
(Arts. 628 - 631)
Second Mate
Takes command of the vessel in case of the inability or
disqualification of the captain and the sailing mate,
assuming in such case their powers and responsibilities.
Third in command
Duties:
1. Preserve the hull and rigging of the vessel;
2. Arrange well the cargo;
3. Discipline the crew;
4. Assign work to crew members;
5. Inventory the rigging and equipment of the vessel,
if laid up. (Art. 632)
Engineers
Officers of the vessel but have no authority except in
matters referring to the motor apparatus. When two or more
are hired, one of them shall be the chief engineer.
Duties:
1. In charge of the motor apparatus, spare parts, and
other instruments pertaining to the engines;
2. Keep the engines and boilers in good condition;
3. Not to change or repair the engine without
authority of the captain;
4. Inform the captain of any damage to the motor
apparatus;

5.
6.

Keep an Engine Book;

Supervise all personnel maintaining the engine.
(Art. 632)

Crew
The aggregate of seamen who man a ship, or the ships
company.
Hired by the ship agent, where he is present and in his
absence, the captain hires them, preferring Filipinos, and in
their absence, he may take in foreigners, but not exceeding
1/5 of the crew. (Art. 634)

approaching their ports to take on board pilots licensed

under the local laws. (Notes and Cases on the Law on
Transportation and Public Utilities, Aquino, T. & Hernando,
R.P. 2004 ed. p. 518)

Classes of Seamans Contracts

1. By the voyage;
2. By the month; and
3. By share of profits or freightage.

Liablity of Pilot
GENERAL RULE: On compulsory pilotage grounds, the
Harbor Pilot is responsible for damage to a vessel or to life
or property due to his negligence.
EXCEPT:
1. Accident caused by force majeure or natural calamity
provided the pilot exercised prudence and extra diligence to
prevent or minimize damages.
2. Countermand or overrule by the master of the vessel in
which case the registered owner of the vessel is liable.
(Sec.11, Art.III PPA Admin Order 03-85)

Just Causes for the Discharge of Seaman While

Contract Subsists
1. Perpetration of a crime;
2. Repeated insubordination, want of discipline;
3. Repeated incapacity and negligence;
4. Habitual drunkenness;
5. Physical incapacity;
6. Desertion. (Art. 637)

SPECIAL CONTRACTS OF MARITIME COMMERCE

1. Charter party
2. Bill of lading
3. Contract of transportation of passengers on sea
voyages
4. Loan on bottomry
5. Loan on respondentia
6. Marine insurance

Rules in case of Death of a Seaman

The seamans heirs are entitled to payment as follows:
1. If death is natural:
a. compensation up to time of death if engaged on
wage
b. if by voyage - half of amount if death occurs on
voyage out; and full, if on voyage in
c. if by shares - none, if before departure; full, if after
departure
2. if death is due to defense of vessel - full payment;
3. if captured in defense of vessel - full payment;
4. if captured due to carelessness - wages up to the
date of the capture. (Art. 645)

CHARTER PARTY
A contract by virtue of which the owner or agent binds
himself to transport merchandise or persons for a fixed
price.
A contract by which an entire ship, or some principal part
thereof is let/leased by the owner to another person for a
specified time or use. (Planters Products, Inc. vs. CA, 226
SCRA 476)
Parties:
1. Ship owner or ship agent
2. Charterer
Classes:
1. Bareboat or demise The charterer provides crew, food
and fuel. The charterer is liable as if he were the owner,
except when the cause arises from the unworthiness of the
vessel. The shipowner leases to the charterer the whole
vessel, transferring to the latter the entire command,
possession and consequent control over the vessels
navigation, including the master and the crew, who thereby
become the charters servants. It transforms a common
carrier into a private carrier.
The charterer becomes the owner of the vessel pro
hac vice, just for that one particular purpose only.
Because the charterer is treated as owner pro hac
vice, the charterer assumes the customary rights and
liabilities of the shipowner to third persons and is held
liable for the expense of the voyage and the wages of
the seamen.
2. Contract of Affreightment A contract whereby the owner
of the vessel leases part or all of its space to haul goods for
others.
The shipowner retains the possession, command and
navigation of the ship, the charterer merely having use
of the space in the vessel in return for his payment of
the charter hired.
Kinds:
a. Time charter vessel is chartered for a fixed
period of time or duration of voyage.
b. Voyage or trip charter the vessel is leased for
one or series of voyages usually for purposes of
transporting goods for charterer.

Complement of the Vessel

All persons on board, from the captain to the cabin boy,
necessary for the management, maneuvers, and service,
thus including the crew, the sailing mates, engineers,
stokers and other employees on board not having specific
designations.
Does not include the passengers or the persons whom
the vessel is transporting.
D. SUPERCARGOES
Persons who discharges administrative duties assigned
to him by ship agent or shippers, keeping an account and
record of transaction as required in the accounting book of
the captain. (Art. 649)
E. PILOT
A person duly qualified, and licensed, to conduct a vessel
into or out of ports, or in certain waters.
The term generally connotes a person taken on board at
a particular place for the purpose of conducting a ship
through a river, road or channel, or from a port.
Master pro hac vice for the time being in the command
and navigation of the ship.
While in exercising his functions a pilot is in sole
command of the ship and supersedes the master for the
time being in the command and navigation of the ship, the
master does not surrender his vessel to the pilot and the
pilot is not the master. There are occasions when the
master may and should interfere and even displace the
pilot, as when the pilot is obviously incompetent or
intoxicated (Far Eastern Shipping Company vs. CA).
Compulsory Pilotage States possessing harbors have
enacted laws or promulgated rules requiring vessels

LEASE

CHARTER PARTY

If for a definite period,

lessee cannot give up the
lease by paying a portion of

Charterer may rescind

charter party by paying half
of the freightage agreed

the amount agreed upon.

upon.

If the leased property is

sold to one who knows of
the existence of the lease,
the new owner must
respect the lease.

The new owner is not

compelled to respect the
charter party so long as he
can load the vessel with his
own cargo. (Art. 689)

Civil law concept

Commercial law concept

A stipulation in a charter party

that in case of a maritime
accident for which the
shipowner is not responsible
by law, contract or otherwise,
the cargo shippers, consignees
or owners shall contribute with
the shipowner in general
average. (Pandect of
Commercial Law and
Jurisprudence, Justice Jose
Vitug, 1997 ed.)

A clause in a charter party

providing that the COGSA
shall apply, even though
the transportation is
domestic, subject to the
extent that any term of the
bill of lading is repugnant to
the COGSA or applicable
law, then to the extent
thereof the provision of the
bill of lading is void.
(Pandect of Commercial
Law and Jurisprudence,
Justice Jose Vitug, 1997
ed.)

CHARTER PARTY

BILL OF LADING

An entire or complete
contract.

More like a private receipt

which the captain gives to
accredit goods received from
persons

Rights and Obligations of Parties

Consensual contract

Real contract

SHIPOWNER OR SHIP
AGENT

BAREBOAT OR
DEMISE CHARTER

CONTRACT OF
AFFREIGHTMENT (TIME OR
VOYAGE CHARTER)

Charterer becomes
liable to others caused
by its negligence

Owner remains liable as

carrier and must answer for
any breach of duty

Charterer regarded as
owner pro hac vice for
the voyage

Charterer is not regarded as

owner.

Owner of vessel
relinquishes possession,
command and
navigation to charterer

The vessel owner retains

possession, command and
navigation of the ship

Common carrier is
converted to private
carrier.

Common carrier is not

converted to a private carrier.

1.

2.
3.
4.

5.

6.

PERSONS WHO MAY MAKE A CHARTER

1. Owner or owners of the vessel, either in whole or
in majority part, who have legal control and
possession of the vessel
2. Charterer may subcharter entire vessel to 3rd
person only if not prohibited in original charter.
(Art.679)
3. Ship agent if authorized by the owner/s or given
such power in the certificate of appointment.
(Art.598)
4. Captain in the absence of the ship agent or
consignee and only if he acts in accordance with
the instructions of the agent or owner and protects
the latters interests. (Art.609)
REQUISITES OF A VALID CHARTER PARTY
1. Consent of the contracting parties
2. Existing vessel which should be placed at the
disposition of the shipper
3. Freight
4. Compliance with Art. 652 of the Code of
Commerce
Clauses Which May Be Included In a Charter Party
Jason clause

Clause paramount or
paramount clause

7.

CHARTERER

If the vessel is
chartered wholly,
not to accept
cargo from
others;
To observe
represented
capacity;
To unload cargo
clandestinely
placed
To substitute
another vessel if
load is less than
3/5 of capacity;
To leave the port
if the charterer
does not bring
the cargo within
the lay days and
extra lay days
allowed;
To place in a
vessel in a
condition to
navigate;
to bring cargo to
nearest neutral
port in case of
war or blockade.
(Arts. 669-678)

1.
2.
3.

4.
5.

To pay the
agreed charter
price;
To pay freightage
on unboarded
cargo;
To pay losses to
others for loading
uncontracted
cargo and illicit
cargo;
To wait if the
vessel needs
repair;
To pay expenses
for deviation.
(Arts. 679-687)

Rescission of a Charter Party

At charterers
request
(Art 688)

At shipowners
request
(Art. 689)

Fortuitous
causes
(Art. 690)

1. By abandoning
the charter and
paying half of the
freightage;
2. Error in tonnage
or flag;
3. Failure to place
the vessel at the
charterers disposal;
4. Return of the
vessel due to
pirates, enemies or
bad weather;
5. Arrival at a port for
repairs.

1. If the extra lay

days terminate
without the cargo
being placed
alongside the
vessel;
2. Sale by the
owner of the
vessel before
loading by the
charterer;

1. War or
interdiction of
commerce;
2. Blockade;
3. Prohibition to
receive cargo;
4. Embargo; and
5. Inability of the
vessel to
navigate.

Terms:
1.
2.

3.

4.
5.

Primage - bonus to be paid to the captain after the

successful voyage.
Demurrage the sum fixed in the charter party as
a remuneration to the owner of the ship for the
detention of his vessel beyond the number of days
allowed by the charter party for loading or
unloading or for sailing.
Deadfreight the amount paid by or recoverable
from a charterer of a ship for the portion of the
ships capacity the latter contracted for but failed
to occupy.
Lay Days - days allowed to charter parties for
loading and unloading the cargo.
Extra Lay Days days which follow after the lay
days have elapsed.

Usual forms of Consummating Contracts

1. C.I.F. cost, insurance and freight;
2. F.O.B. - free on board;
3. F.A.S. - free alongside ship; and
4. C. & F. - cost and freight.
TranSshipment of Goods
The act of taking cargo out of one ship and loading it in
another, or the transfer of goods from the vessel stipulated
in the contract of affreightment to another vessel before the
place of destination named in the contract has been
reached, or the transfer for further transportation from one
ship or conveyance to another.
It is not dependent on the ownership of the transporting
ships or in the change of carriers, but rather on the fact of
actual physical transfer of cargo from one vessel to another.
If done without legal excuse, however competent and safe
the vessel into which the transfer is made, is a violation of
contract and infringement of right of shipper and subjects
carrier to liability if freight is lost event by cause otherwise
excepted. (Magellan Manufacturing vs. CA, 201 SCRA 102)
Loan oN Bottomry AND RESPONDENTIA
A real, unilateral, aleatory contract, by virtue of which one
person lends to another a certain amount of money or
goods on things exposed to maritime risks, which amount,
with its earnings, is to be returned if the things are safely
transported, and which is lost if the latter are lost.
LOAN ON BOTTOMRY

LOAN ON RESPONDENTIA

Definition
Loan made by shipowner
or ship agent guaranteed
by vessel itself and
repayable upon arrival of
vessel at destination. (Art.
719)

Loan taken on security of the

cargo laden on a vessel, and
repayable upon safe arrival
of cargo at destination. (Art.
719)

Who may contract

Shipowner or ship agent.
Outside of the residence
of the owners - the
captain.

Forms:
1.
2.
3.

Public instrument
Policy signed by the contracting parties and the
broker taking part therein
Private instrument (Art. 720)

Contents:
1. Kind, name and registry of the vessel;
2. Name, surname and domicile of the captain;
3. Names, surnames and domiciles of the
borrower and the lender;
4. Amount of the loan and the premium stipulated;
5. Time for repayment;
6. Goods pledged to secure repayment;
7. Voyage during which the risk is run (Art.721)

BOTTOMRY/
RESPONDENTIA

ORDINARY LOAN
(MUTUUM)

Not subject to Usury Law

Subject to Usury Law

Liability of the borrower is

contingent on the safe
arrival of the vessel or
cargo at destination

Not subject to any

contingency (absolute
liability)

The last lender is a

preferred creditor

The first lender is a

preferred creditor

WHEN LOAN ON BOTTOMRY OR RESPONDENTIA

REGARDED AS SIMPLE LOAN
1. Lender loaned an amount larger than the value of
the object due to fraudulent means employed by
the borrower. (ART.726)
2. Full amount of the loan is not used for the cargo or
given on the goods if all of them could not have
been loaded, the balance will be considered a
simple loan. (ART.727)
3. If the effects on which the money is taken is not
subjected to any risk. (ART.729)
Note: Under existing laws, the parties to a loan, whether
ordinary or maritime, may agree on any rate of interest. (CB
Circular 905)
MARINE INSURANCE

LOAN ON BOTTOMRY
OR RESPONDENTIA

Indemnity is paid after the

loss has occurred

Indemnity is paid in
advance by way of a loan

In case of loss of the vessel

due to a risk insured
against, the obligation of the
insurer becomes absolute

In case of loss of the

vessel due to a marine
peril, the obligation of the
borrower to pay is
extinguished

Consensual contract

Real contract

Only the owner of the cargo.

Common elements:
1. Exposure of security to marine peril;
2. Obligation of the debtor conditioned only upon
safe arrival of the security at the point of
destination.

Hypothecary Nature of Bottomry/ Respondentia

GENERAL RULE: The obligation of the borrower to pay
the loan is extinguished if the goods given as security are
absolutely lost by reason of an accident of the sea, during
the voyage designated, and if it is proven that the goods
were on board.
EXCEPTIONS:
1. Loss due to inherent defect;

2.
3.
4.
5.

Loss due to the barratry on the part of the captain;

Loss due to the fault or malice of the borrower;
The vessel was engaged in contraband; and
The cargo loaded on the vessel be different in
from that agreed upon.

3.
4.

success;
proper formalities
and legal steps.

Liability

Concurrence of Marine Insurance and Loan on

Bottomry/Respondentia
1. The insurable interest of the owner of a ship
hypothecated by bottomry is only the excess of
the value over the amount secured by bottomry.
(Sec. 101, Insurance Code)
2. The value of what may be saved in case of
shipwreck shall be divided between the lender and
the insurer in proportion to the interest of each
one. (Art. 735)
Note: If a vessel is hypothecated by bottomry only the
excess is insurable, since a loan on bottomry partakes of
the nature likewise of an insurance coverage to the extent
of the loan accommodation. The same rule would apply to
the hypothecation of the cargo by respondentia. (Pandect
of Commercial Law and Jurisprudence, Justice Jose Vitug,
1997 ed.)
ACCIDENTS IN MARITIME COMMERCE
1. Averages
2. Arrival Under Stress
3. Collision
4. Shipwreck
AVERAGE
An extraordinary or accidental expense incurred during
the voyage in order to preserve the cargo, vessel or both,
and all damages or deterioration suffered by the vessel
from departure to the port of destination, and to the cargo
from the port of loading to the port of consignment. (Art.
806)
The person whose property has been saved must
contribute to reimburse the damage caused or expense
incurred if the situation constitutes general average.
Classes:
1. Particular or Simple Average
2. Gross or General Average
Where both vessel and cargo are saved, it is general
average; where only the vessel or only the cargo is saved, it
is particular average.
Expenses incurred to refloat a vessel, which accidentally
ran aground, in order to continue its voyage, do not
constitute general average. Not only is there absence of a
marine peril, common safety factor, and deliberateness. It is
the safety of the property, and not the voyage, which
constitutes the true foundation of general average. (A.
Magsaysay, Inc. vs. Agan, G.R.No. L-6393, Jan. 31, 1955)

The owner of the goods

which gave rise to the
expense or suffered the
damage shall bear this
average. (Art. 810)

All the persons having an

interest in the vessel and
the cargo therein at the time
of the occurrence of the
average shall contribute to
satisfy this average. (Art.
812)
The insurers (Art.859) and
lenders on bottomry and
respondentia shall likewise
contribute. (Art.732).

Number of interests involved

Only one interest involved

Several interests involved

Share in the damage or expense

100% share

In proportion to the value of

the owners property saved

Right to recover
No reimbursement

There may be
reimbursement

Kinds (not exclusive)

Art. 809

Art. 811

Procedure for recovery

1.
2.
3.
4.
5.

6.
PARTICULAR OR
SIMPLE

GROSS OR GENERAL

Assembly and
deliberation
Resolution of the
captain
Entry of the
resolution in the
logbook
Detailed minutes
Delivery of the
minutes to the
maritime judicial
authority of the
first port, within 24
hours from arrival,
Ratification by
captain under
oath. (Arts. 813814)

Definition
Damages or expenses
caused to the vessel or
cargo that did not inure to
the common benefit, and
borne by respective
owners. (Art. 809)

Damages or expenses
deliberately caused in order
to save the vessel, its cargo
or both from real and known
risk. (Art. 811)

Requisites
1.
2.

common danger;
deliberate
sacrifice;

GOODS NOT COVERED BY GENERAL AVERAGE EVEN

IF SACRIFICED
1. Goods carried on deck. (ART.855)
2. Goods not recorded in the books or records of the
vessel. (ART.855 (2))
3. Fuel for the vessel if there is more than sufficient
fuel for the voyage. (Rule IX, York-Antwerp Rule)
Jettison
Act of throwing cargo overboard in order to lighten the
vessel.
Order of goods to be cast overboard:
1. Those which are on the deck, preferring the
heaviest one with the least utility and value;

2.

Those which are below the upper deck, beginning

with the one with greatest weight and smallest
value. (Art. 815)

Jettisoned goods are not res nullius nor deemed

abandoned within the meaning of civil law so as to be the
object of occupation by salvage. (Pandect of Commercial
Law and Jurisprudence, Justice Jose Vitug, 1997 ed.)
In order that the jettisoned goods may be included in the
gross or general average, the existence of the cargo on
board should be proven by means of the bill of lading. (Art.
816)
York-Antwerp (Y-A) Rules on Determining Liability for
Averages With Regard To Deck Cargo
1. Deck cargo is allowed only in
domestic/coastwise/inter-island shipping, and is
prohibited in international/overseas/foreign
shipping.
2. If deck cargo is loaded with the consent of the
shipper on overseas trade, it must always
contribute to general average, but should the
same be jettisoned, it would not be entitled to
reimbursement because there is violation of the YA Rules.
3. If deck cargo is loaded with the consent of the
shipper on coastwise shipping, it must always
contribute to general average and if jettisoned
would be entitled to reimbursement.
Reason: In domestic shipping, voyages are usually short
and the seas are generally not rough. In overseas shipping,
the vessel is exposed for many days to perils of the sea.
DOMESTIC

INTERNATIONAL

Deck cargo is allowed

Deck cargo is not allowed

General average

Particular average

Without shippers consent

Captain is liable

Captain is liable

ARRIVAL UNDER STRESS (ARRIBADA)

The arrival of a vessel at the nearest and most
convenient port instead of the port of destination, if during
the voyage the vessel cannot continue the trip to the port of
destination.

The inability to
continue
voyage is due
to lack of
provisions,
well-founded
fear of seizure,
privateers,
pirates, or
accidents of
the sea
disabling it to
navigate. (Art.
819)

4.

Defect of
vessel
due to
improper
repair;
and
Malice,
negligenc
e, lack of
foresight
or skill of
captain.
(Art. 820)

It is the duty of the captain to continue the voyage without

delay after the cause of the arrival under stress has ceased
failing in such duty renders him liable. However, in case the
cause has been risk of enemies, there must first be an
assembly before departure. (Art. 825)
Steps:
1. Captain should determine during the voyage if
there is well founded fear of seizure, privateers
and other valid grounds;
2. Captain shall assemble the officers and summon
the persons interested in the cargo who may
attend the meeting but without a right to vote;
3. The officers shall determine and agree if there is
well-founded reason after examining the
circumstances. The captain shall have the
deciding vote;
4. The agreement shall be drafted and the proper
minutes shall be signed and entered in the log
book;
5. Objections and protests shall likewise be entered
in the minutes.
COLLISION
Impact of two vessels both of which are moving.

With shippers consent

When lawful

3.

When unlawful

1.

2.

Lack of
provision
s due to
negligenc
e to carry
according
to usage
and
customs;
Risk of
enemy
not well
known or
manifest

Who bears
expenses:

The shipowner
or ship agent
is liable in
case of
unlawful arrival
under stress.
But they shall
not be liable
for the
damages
caused by
reason of a
lawful arrival.
(Art. 821)

Allision
Impact between a moving vessel and a stationary one.
Nautical Rules to Determine Negligence
1. When two vessels are about to enter a port, the
farther one must allow the nearer to enter first; if
they collide, the fault is presumed to be imputable
to the one who arrived later, unless it can be
proved that there was no fault on its part.
2. When two vessels meet, the smaller should give
the right of way to the larger one.
3. A vessel leaving port should leave the way clear
for another which may be entering the same port.
4. The vessel which leaves later is presumed to have
collided against one which has left earlier.
5. There is a presumption against the vessel which
sets sail in the night.
6. There is a presumption against the vessel with
spread sails which collides with another which is
at anchor and cannot move, even when the crew
of the latter has received word to lift anchor, when
there was not sufficient time to do so or there was
fear of a greater damage or other legitimate
reason.
7. There is a presumption against an improperly
moored vessel.
8. There is a presumption against a vessel which
has no buoys to indicate the location of its
anchors to prevent damage to vessels which may
approach it.
9. Vessels must have proper look-outs or persons
trained as such and who have no other duty aside
therefrom. (Smith Bell v. CA)

Nautical Rules as to Sailing Vessel and Steamship

1. Where a steamship and a sailing vessel are approaching
each other from opposite directions, or on intersecting
lines, the steamship from the moment the sailing
vessel is seen, shall watch with the highest diligence
her course and movements so as to be able to adopt
such timely means of precaution as will necessarily
prevent the two boats from coming in contact.
2. The sailing vessel is required to keep her course unless
the circumstances require otherwise.
Zones of Time in the Collision of Vessels

1.

First zone covers all time up to the moment

when risk of collision begins.
No rule is as yet applicable for none is necessary. Each
vessel is free to direct its course as it deems best without
reference to the movements of the other vessel.

2.

Second zone time between moment when risk

of collision begins and moment it becomes a
practical certainty.
It is in this period where the vessel is required to keep
away and avoid the danger

3.

Third zone time when collision is certain and

time of impact.
An error in this zone would no longer be legally
consequential.
The vessel which has forced the privileged vessel into
danger is responsible even if the p.vessel committed an
error within that zone.
Error in Extremis - sudden movement made by a faultless
vessel during the third zone of collision with another vessel
which is at fault during the 2nd zone. Even if such sudden
movement is wrong, no responsibility will fall on said
faultless vessel. (Urrutia and Co. v. Baco River Plantation
Co., 26 PHIL 632)
Cases Covered By Collision and Allision
1. One vessel at fault
Vessel at fault is liable for damage caused to innocent
vessel as well as damages suffered by the owners of cargo
of both vessels. (Art. 826)

2. Both vessels at fault

Each vessel must bear its own loss, but the shippers of
both vessels may go against the shipowners who will be
solidarily liable. (Art. 827)
3. Vessel at fault not known
Each vessel must bear its own loss, but the shippers of
both vessels may go against the shipowners who will be
solidarily liable. (Art. 828)
Doctrine of Inscrutable Fault In case of collision
where it cannot be determined which between the two
vessels was at fault, both vessels bear their respective
damage, but both should be solidarily liable for
damage to the cargo of both vessels.
4. Third vessel at fault
The third vessel will be liable for losses and damages.
(Art. 831)
5. Fortuitous event/force majeure
No liability. Each bears its own loss. (Art. 830)
The doctrine of res ipsa loquitur applies in case a moving
vessel strikes a stationary object, such as a bridge post,
dock, or navigational aid. (Far Eastern Shipping v. CA,
Luzon Stevedoring vs. CA)
Even if the cause of action against the common carrier is
based on quasi-delict, the defense of due diligence in the
selection and supervision of employees is unavailing in
case of a maritime tort resulting in collision. It is not a civil
tort governed by the Civil Code but a maritime one

governed by Arts. 826-839 of the Code of Commerce.

(Manila Steamship vs. Insa Abdulhaman)
Doctrine of Last Clear Chance and Rule on Contributory
Negligence cannot be applied in collision cases because of
Art.827 of the Code of Commerce. (Notes and Cases on
the Law on Transportation and Public Utilities, Aquino, T. &
Hernando, R.P. 2004 ed.)
MARITIME PROTEST
Condition precedent or prerequisite to recovery of
damages arising from collisions and other maritime
accidents.
It is a written statement made under oath by the captain
of a vessel after the occurrence of an accident or disaster in
which the vessel or cargo is lost or damaged, with respect
to the circumstances attending such occurrence, for the
purpose of recovering losses and damages.
Excuses for not filing protest: 1) where the interested
person is not on board the vessel; and 2) on collision time,
need not be protested. (Art. 836)
Cases applicable:
1. Collision (Art. 835);
2. Arrival under stress (Art. 612(8));
3. Shipwrecks (Arts. 612(15), 843);
4. Where the vessel has gone through a hurricane or
when the captain believes that the cargo has
suffered damages or averages (Art. 624).
Who makes: Captain
When made: within 24 hours from the time the collision
took place.
Before whom made: competent authority at the point of
collision or at the first port of arrival, if in the Philippines and
to the Philippine consul, if the collision took place abroad.
(Art. 835)
SHIPWRECK
It is the loss of the vessel at sea as a consequence of its
grounding, or running against an object in sea or on the
coast. It occurs when the vessel sustains injuries due to a
marine peril rendering her incapable of navigation.
If the wreck was due to malice, negligence or lack of skill
of the captain, the owner of the vessel may demand
indemnity from said captain. (Art. 841)
The rules on collision or allision, as may be pertinent, can
equally apply to shipwrecks.
SPECIAL CONCEPTS
ARRASTRE SERVICE
A contract for the unloading of goods from a vessel.
Applicability: Overseas trade only. (Commercial Law
Review, C. Villanueva, 2004 ed.)
Significance: When a person brings in cargo from
abroad, he cannot unload and deliver the cargo by himself.
The unloading must be done by the arrastre operator, which
will then deliver the cargo to the importer. (Commercial Law
Review, C. Villanueva, 2004 ed.)
Nature of business: It is a public utility, discharging
functions which are heavily invested with public interest.
Liability:
1. Similar to a warehouseman (Lua Kian v. Manila Railroad)
2. Similar to a common carrier (Northern Motors v. Prince
Line)
3. Solidary liability with the common carrier
Note: In order that the arrastre operator may be held liable,
the consignee must prove that the damage was due to the
negligence and while the goods are in the custody of the
arrastre operator. (Hartford Fire Insurance v. E. Razon, Inc.)
STEVEDORING SERVICE
The carriage of goods from the warehouse or pier to the
holds of the vessel. (Chief of Staff vs. CIR)

 As understood in the port business, the term consists of

the handling of cargo from the hold of the ship to the dock,
in case of pier-side unloading; or to a barge, in case of
unloading at sea. (Anglo-Fil Trading Corp. vs. Lazaro)
The loading on the ship of outgoing cargo is also part of
stevedoring work. (Ibid.)
CONTAINERIZATION/ SAID-TO-CONTAIN/
SHIPPERS LOAD AND COUNT SYSTEM
System whereby the shipper loads his cargoes in a
specially designed container, seals the container and
delivers it to the carrier for transportation. The carrier does
not participate in the counting of the merchandise for
loading into the container, the actual loading, and the
sealing of the container. (US Lines v. Comm. Of Customs,
ICTSI v. Prudential Guarantee)
The matter of quantity, description and conditions of the
cargo inside the container is the sole responsibility of the
shipper, unless there is stipulation to the contrary. (US Lines
vs. Comm. Of Customs, Reyma Brokerage v. Phil. Home
Assurance)
Note: In order to attribute to the carrier any damage to the
shipment that may be found, inspection of the goods should
be done at pier-side. (Bankers vs. CA)
III. CARRIAGE OF GOODS BY SEA ACT/COGSA (C.A.
No. 65)
APPLICABILITY
The transportation must be:
1. Water/maritime transportation;

2.

for the carriage of goods; and

overseas/international/foreign (from foreign port to
Philippine port).
It can be applied in domestic sea transportation if agreed
upon by the parties. (Clause paramount or paramount
clause)
3.

IMPORTANT FEATURES:
1. Amount of carriers liability
2. Notice of damage
3. Prescriptive period
AMOUNT OF CARRIERS LIABILITY
Under the Sec. 4(5), the liability limit is set at $500 per
package or customary freight unit unless the nature and
value of such goods is declared by the shipper. This is
deemed incorporated in the bill of lading even if not
mentioned in it. (Eastern Shipping vs. IAC, 150 SCRA 463)
Note that Art. 1749, NCC applies to domestic/interisland/coastwise trade.
NOTICE OF DAMAGE (SEC. 3(6))
Rules:
a. Patent damage: shipper should file a claim with
the carrier immediately upon delivery
b. Latent damage: shipper should file a claim with
the carrier within three days from delivery.
Note: The filing of a notice of claim is not a condition
precedent.
PRESCRIPTIVE PERIOD
Action for loss or damage to the cargo should be brought
within one year after:
a. Delivery of the goods (delivered but damaged
goods); or
b. The date when the goods should have been
delivered (non-delivery). (Sec. 3[6])
Loss or Damage as applied to the COGSA contemplates
a situation where no delivery at all was made by the shipper
of the goods because the same had perished, gone out of

commerce, or disappeared in such a way that their

existence is unknown or they cannot be recovered. Thus, it
is inapplicable in case of misdelivery or conversion. (Ang
vs. American Steamship Agencies Inc.) and damage arising
from delay or late delivery (Mitsui O.S.K. Lines Ltd. vs. CA).
In such instance the, Civil Code rules on prescription shall
apply.
The one-year prescriptive period is suspended by:
1. The express agreement of the parties (Universal
Shipping Lines, Inc. vs. IAC, 188 SCRA 170)
2. The filing of an action in court until it is dismissed.
(Stevens & Co. vs. Nordeutscher Lloyd, 6 SCRA
180)
The one-year period shall run from delivery of the last
package and is not suspended by extrajudicial demand.
(Dole Phils.,Inc. vs. Maritime Co.,148 SCRA 118)
The one-year period shall run from delivery to the arrastre
operator and not to the consignee. (Union Carbide Phils,
Inc. vs. Manila Railroad Co.,SCRA 359)
The insurer exercising its right of subrogation is bound by
the one-year prescriptive period. However, it does not apply
to the claim against the insurer for the insurance proceeds.
(Fil. Merchants Ins. Co. vs. Alejandro; Mayer Steel Pipe
Corp. vs. CA)