FINAL REVIEWER ON TRANSPORTATION LAWS
TRANSPORTATION LAW
March 6, 2010
a public utility without owning the facilities used to
serve the public.
 Transportation law is the body of rules and
regulations set to govern and to properly administer
public utilities or any means of transportation, whether
it be by land, sea or air such as maritime vessels,
taxicabs, aircrafts and etc.
Even the mere formation of a public utility
corporation does not ipso facto characterize the
corporation as one operating a public utility.
COMMON CARRIER
LAWS GOVERNING
PHILIPPINES
TRANSPORTATION
IN
THE
Transportation laws in the Philippines whether
by land, sea or air are generally governed by the New
Civil Code (Arts. 1732-1766).
 Art. 1732 – Common carriers are persons,
corporations, firms and associations engaged in the
business of carrying or transporting passengers or
goods or both, by land, water, or air, for compensation,
offering their service to the public.
In the absence of any provision of the New Civil
Code on the rights and obligations of common carriers,
the Code of Commerce and other special laws, such as
the Carriage of Goods By Sea Act, Salvage Law and other
special laws insofar as pertinent may be applied.
The above article does not make a distinction
between one whose principal business activity is the
carrying of persons or goods or both, and one who does
such carrying as an ancillary activity (in local idiom, as “a
sideline”).
The 1987 Constitution provides, some
restrictions or limitations in the issuance of franchise to
public utilities which includes transportation industries.
COMMON
CARRIER
(DISTINGUISHED)
MAY A 100% FOREIGN CORPORATION OWN A PUBLIC
UTILITY?
A 100% foreign corporation may own facilities
but they cannot operate as a public utility.
The Constitution, in no uncertain terms,
requires a franchise for the operation of a public utility.
However, it does not require a franchise before one can
own facilities needed to operate public utility as long as
it does not operate them to serve the public.
Right of ownership of facilities in public utility vs. Right
to operate the same (distinction)
Ownership – it is defined as a relation in law by virtue
of which a thing pertaining to one person is completely
subjected to his will in everything not prohibited by law
or the concurrence with the rights of another.
Right of ownership of facilities in public utility – The
exercise of the rights encompassed in ownership is
limited by law so that a property cannot be operated
and used to serve the public as a public utility unless the
operator has a franchise.
Operation – the operation of a public utility includes
the transportation of passengers from one point to
another point, their loading and unloading at
designated places.
The right to operate a public – utility may exist
independently and separately from the ownership of
the facilities thereof.
One can own said facilities without operating
them as a public utility, or conversely, one may operate
VS.
PRIVATE
CARRIER
COMMON CARRIER
(public carriers)
PRIVATE CARRIER
(special carrier)
- bound by the law to
carry passengers as far as
human care and foresight
can provide using the
utmost diligence of very
cautious persons and with
due regard for all the
circumstances.
- is not bound by the law
to observe extraordinary
diligence
in
the
performance
of
its
obligation.
standard
care
is - standard care is that of a
extraordinary diligence.
good father of a family.
(Art. 1173 of the Civil
Code.)
- it is an isolated
transaction, not a part of
the
business
or
occupation,
and
the
carrier does not hold itself
out to carry the goods for
the general public or to a
limited clientele, although
involving the carriage of
goods for a fee.
VIGILANCE OVER GOODS
Art. 1734 – Common carriers are responsible for the
loss, destruction, or deterioration of the goods, unless
the same is due to any of the following causes only:
(1) Flood, storm, earthquake, lightning, or other
natural disaster or calamity.
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(2) Act of the public enemy in war, whether
international or civil;
(3) Act or omission of the shipper or owner of the
goods;
(4) The character of the goods or defects in the
packing or in the containers;
(5) Order or act of competent public authority.
Art. 1735 – In all cases other than those mentioned in
Nos. 1, 2, 3, 4, and 5 of the preceding article, if the
goods are lost, destroyed or deteriorated, common
carriers are presumed to have been at fault or to have
acted negligently, unless they prove that they observed
extraordinary diligence as required in Article 1733.
Art. 1736 – The extraordinary responsibility of the
common carriers lasts from the time the goods are
unconditionally placed in the possession of, and
received by the carrier for transportation until the same
are delivered, actually or constructively, by the carrier
to the consignee, or to the person who has a right to
receive them, without prejudice to the provisions of
Article 1738.
Art. 1737 – The common carrier’s duty to observed
extraordinary diligence in the vigilance over the goods
remain in full force and effect even when they are
temporarily unloaded or stored in transit, unless the
shipper or owner has made use of the right of stoppage
in transitu.
Art. 1738 – The extraordinary liability of the common
carrier continues to be operative even during the time
the goods are stored in a warehouse of the carrier at
the place of destination, until the consignee has been
advised of the arrival of the goods and has had
reasonable opportunity thereafter to remove them or
otherwise dispose of them.
Art. 1739 – In order for the common carrier may be
exempted from responsibility, the natural disaster must
have been the proximate and only cause of the loss.
However, the common carrier must exercise due
diligence to prevent or minimize loss before, during and
after the occurrence of flood, storm, or other natural
disaster in order that the common carrier may be
exempted from liability for the loss, destruction, or
deterioration of the goods. The same duty is incumbent
upon the common carrier in case of an act of the public
enemy referred to in Article 1734, No. 2.
Art. 1740 – If the common carrier negligently incurs in
delay in transporting the goods, a natural disaster shall
not free such carrier from responsibility.
Art. 1741 – If the shipper or owner merely contributed
to the loss, destruction, or deterioration of the goods,
the proximate cause thereof being the negligence of the
common carrier, the latter shall be liable in damages,
which however, shall be equitably reduced.
Art. 1742 – Even if the loss, destruction, or
deterioration of the goods, or the faulty nature of the
March 6, 2010
packing or of the containers, the common carrier must
exercise due diligence to forestall or lessen the loss.
Art. 1743 – If through order of public authority the
goods are seized or destroyed, the common carrier is
not responsible, provided said public authority had
power to issue the order.
Art. 1744 – A stipulation between the common carrier
and the shipper or owner limiting the liability of the
former for the loss, destruction, or deterioration of the
goods to a degree less than extraordinary diligence shall
be valid, provided it be:
(1) In writing, signed by the shipper or owner;
(2) Supported by a valuable consideration other
than the service rendered by the common
carrier; and
(3) Reasonable, just and not contrary to public
policy.
Art. 1745 – Any of the following or similar stipulations
shall be considered unreasonable, unjust and contrary
to public policy:
(1) That the goods are transported at the risk of the
owner or shipper;
(2) That the common carrier will not be liable for
any loss, destruction, or deterioration of the
goods;
(3) That the common carrier need not observe any
diligence in the custody of the goods
(4) That the common carrier shall exercise a degree
of diligence less than that of a good father of a
family, or of a man of ordinary prudence in the
vigilance over the movables transported;
(5) That the common carrier shall not be
responsible for the acts or omissions of his or its
employees;
(6) That the common carrier’s liability for acts
committed by thieves, or of robbers who do not
act with grave abuse or irresistible threat,
violence or force, is dispensed with or
diminished;
(7) That the common carrier is not responsible for
the loss, destruction, or deterioration of goods
account of the defective condition of the car,
vehicle, ship, airplane or other equipment used
in the contract of carriage.
Art. 1746 – An agreement limiting the common carrier’s
liability may be annulled by the shipper or owner if the
common carrier refused to carry the goods unless the
former agreed to such stipulation.
Art. 1747 – If the common carrier, without just cause,
delays the transportation of the goods or changes the
stipulated or usual route, the contract limiting the
common carrier’s liability cannot be availed of in case of
the loss, destruction, or deterioration of the goods.
Art. 1748 – An agreement limiting the common carrier’s
liability for the delay on account of strikes or riot is
valid.
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Art. 1749 – A stipulation that the common carrier’s
liability is limited to the value of the good appearing in
the bill of lading, unless the shipper or owner declares a
greater value, is binding.
Art. 1750 – A contract fixing the sum that may be
recovered by the owner of shipper for the loss,
destruction, or deterioration of the good is valid, if it is
reasonable and just under the circumstances, and has
been fairly and freely agreed upon.
Art. 1751 – The fact that the common carrier has no
competitor along the line or route, or a part thereof, to
which the contract refers shall be taken into
consideration on the question of whether or not a
stipulation limiting the common carrier’s liability is
reasonably, just and in consonance with public policy.
Art. 1752 – Even when there is an agreement limiting
the liability of the common carrier in the vigilance over
the goods, the common carrier is disputably presumed
to have been negligent in the case of their loss,
destruction or deterioration.
March 6, 2010
stipulated. As a contract, it names the parties, which
includes the consignee, fixes route, destination, freight
rates or charges, and stipulates the rights and
obligations assumed by the parties. Being a contract, it
is a law between the parties who are bound by its terms
and conditions provided that these are not contrary to
law, morals, good customs, public order and public
policy.
A bill of lading usually becomes effective upon
its delivery to and acceptance by the shipper. It is
presumed that the stipulations of the bill were, in the
absence of fraud, concealment or improper conduct
known to the shipper, and he is generally bound by his
acceptance whether he reads the bill or not.
 It is a list of merchandise being transported,
especially by ship, together with the conditions that
apply to its transportation.
When can there be delay in the performance of
obligation?
SAFETY OF PASSENGERS (1755 TO 1763)
Art. 1753 – The law of the country to which the goods
are to be transported shall govern the liability of the
common carrier for their loss, destruction, or
deterioration.
Art. 1755 – A common carrier is bound to carry
passengers safely as far as human care and foresight
can provide, using the utmost diligence of very cautious
persons, with a due regard for all the circumstances.
Art. 1754 – The provisions of Articles 1733 to 1753 shall
apply to the passenger’s baggage which is not in his
personal custody or in that of his employees. As to
other baggage, the rules in Articles 1998 and 2000 to
2003 concerning the responsibility of the hotel-keepers
shall be applicable.
Art. 1756 – In case of death or injuries to passengers,
common carriers are presumed to have been at fault or
to have acted negligently, unless they prove that they
observed extraordinary diligence as prescribed in
Articles 1733 and 1755.
ELEMENTS OF FORTUITOUS EVENT
Natural disasters such as flood, storm,
earthquake, lightning or other natural calamity.
In order an obligor may be exempted from a
breach of an obligation due to caso fortuito or an Act of
God, the following requisite must concur:
1. The cause of the breach of the obligation must
be independent from the will of the debtor;
2. The event must be unforeseen and
unavoidable;
3. The event must be such as to render it
impossible for the debtor to fulfill his obligation
in a normal manner; and
4. The debtor must be free from any participation
in, or aggravation of the injury to the creditor.
 Force Majeure generally applies to a natural
accident, such as that caused by a lightning, an
earthquake, a tempest or a public enemy.
BILL OF LADING – It operates both as a receipt and as a
contract. It is a receipt for the goods shipped and a
contract to transport and deliver the same as therein
Art. 1757 – The responsibility of a common carrier for
the safety of passengers as required in Articles 1733
and 1755 cannot be dispensed with or lessened by
stipulation, by the posting of notices, by statements on
tickets, or otherwise.
Art. 1758 – When a passenger is carried gratuitously, a
stipulation limiting the common carrier’s liability for
negligence is valid, but not for willful acts or gross
negligence.
Art. 1759 – Common carriers are liable for the death of
or injuries to passengers through the negligence or
willful acts of the former’s employees, although such
employees may have been acted beyond the scope of
their authority or in violation of the orders of the
common carriers.
The liability of the common carriers does not
cease upon proof that they exercised all the diligence of
a good father of a family in the selection and
supervision of their employees.
Art. 1760 – The common carrier’s responsibility
prescribed in the preceding article cannot be eliminated
or limited by stipulation, by the posting of notices, by
statements on the tickets or otherwise.
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Art. 1761 – The passenger must observe the diligence of
a good father of a family.
Art. 1762 – The contributory negligence of the
passenger does not bar recovery of damages fro his
death or injuries, if the proximate cause thereof is
negligence of the common carrier, but the amount of
damages shall be equitably reduced.
Art. 1763 – A common carrier is responsible for injuries
suffered by a passenger on account of the willful acts or
negligence of other passengers or of strangers, if the
common carrier’s employees through the exercise of
the diligence of a good father of a family could have
prevented or stopped the act or omission.
When are the manufacturer considered an agent of
the common carrier?
March 6, 2010
 “Salvage is founded on the equity of
remunerating private and individual services performed
in saving, in whole or in part, a ship or its cargo from
impending peril, or recovering them after actual loss. It
is a compensation for actual services rendered to the
property charged with it, and is allowed for meritorious
conduct of the salvor, and in consideration of a benefit
conferred upon the person whose property he has
saved. A claim for salvage rests of the principle that,
unless the property be in fact saved by those who claim
the compensation, it can be allowed, however
benevolent their intention and however heroic their
conduct.” Flanders on Maritime Law.
Remunerating – to pay somebody for goods and
services, or compensate somebody financially for losses
sustained or inconvenience caused.
GENERAL PRINCIPLES GOVERNING SALVAGE.
DAMAGES FOR BREACH OF CONTRACT UNDER ARTICLE
1764 AND 1766.
“The relief of property from an impending peril
of the sea, by the voluntary exertions of those who are
under no legal obligation to render assistance, and the
consequent ultimate safety of the property, constitute a
case of salvage. It may be a case of more or less merit,
according to the degree of peril in which the property
was, and the danger and difficulty of relieving it; but
these circumstance effect the degree of the service and
not its nature.”
Art. 1764 – Damages in cases comprised in this Section
shall be awarded in accordance with Title XVIII of this
Book, concerning Damages. Article 2066 shall also apply
to death of a passenger caused by the breach of
contract by a common carrier.
“Salvage is the compensation allowed to
persons whose assistance a ship or her cargo has been
saved, in whole or in part, from impending peril on the
sea, or in recovering such property from actual loss, as
in case of shipwreck, derelict, or recapture.”
Art. 1765 – The Public Service Commission may, on its
own motion or on petition of any interested party, after
due hearing, cancel the certificate of public convenience
granted to any common carrier that repeatedly fails to
comply with his duty to observe extraordinary diligence
as prescribed in this Section.
THREE ELEMENTS NECESSARY TO A VALID SALVAGE
CLAIM
Why are common carriers required to exercise
extraordinary diligence?
Study Article 1758.
Art. 1766 – In all matters not regulated by this Code,
the rights and obligations of common carriers shall be
governed by the Code of Commerce and by special laws.
(1) A marine peril;
(2) Service voluntarily rendered when not required
as an existing duty or from a special contract;
and
(3) Success, in whole or in part, or that the service
rendered contributed to such success.
SUBJECTS OF SALVAGE /Concept of salvage.
When are moral damages proper to be awarded?
Factors to be considered in the award of damages to
accident victim?
SALVAGE
 Salvage may be defined as a service which one
person renders to the owner of a ship or goods, by his
own labor, preserving the goods or the ship which the
owner or those entrusted with the care of them have
either abandoned in distress at sea, or unable to protect
and secure.
1. The ship itself.
2. Jetsam – Goods which are cast into the sea, and
there sink and remain under water.
3. Floatsam or Flotsan – Goods which are cast into
the sea when cast overboard. “Jetsam” differs
from “flotsam,” in this: that in the latter, the
goods float, while in the former, they sink, and
remain under water.
4. Ligan or Lagan – Goods cast into the sea tied to
a buoy, so that they may be found again by the
owners.
Buoy – a large anchored float, often equipped with
lights and bells, that serves as a guide or warning to
ships.
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Distinguish Salvage from Towage
Page 190
What is abandonment.
Study the Prescriptive Period in the filing of the
Case under COGSA Law.
PUBLIC UTILITY – is a business or service engaged in
regularly supplying the public with some commodity or
service of public consequence such as electricity, gas,
water, transportation, telephone or telegraph service.
The term implies public use and service.
March 6, 2010
OLD OPERATOR RULE – Before permitting a new
operator to invade territory of another already
established with a certificate of public convenience,
thereby entering into competition with it, the prior
operator must be given an opportunity to extend its
service in order to meet the public.
THIRD OPERATOR RULE – Where two operators are
more than serving the public, there is no reason to
permit a third operator to engage in competition with
them. Thus, the fact that it is only one trip and of little
consequence, is not sufficient reason to grant the
application. However, if the later on circumstance
would change requiring the operation of new units or
extending existing facilities, the third operator rule
would be subject to the prior applicant rule and also as
to who may best subserve the public interests.
Public utilities are privately-owned and
operated business whose services are essential to the
general public. They are enterprises whih specially cater
to the needs of the public and conduce to their comfort
and convenience.
PROTECTION OF INVESTMENT RULE – It is one of the
primary purposes of the Public Service Law to protect
and conserve investments which have already been
made for that purpose by public service operators.
CERTIFICATE OF PUBLIC CONVENIENCE?
VESSEL
Certificate of Public Convenience (CPC) is an
authorization granted by the LTFRB for the operation of
land transportation services for public use as required
by the law.
 Any barge, lighter, bulk carrier, passenger ship
freighter, tanker, container ship, fishing boats or other
artificial contrivance utilizing any source of motive
power, designed, used or capable of being used as a
means of water transportation operating either as
common contract carrier, including fishing vessels
covered under Presidential Decree No. 43, except:
Requirements before CPC may be granted
(1) The applicant must be a citizen of the
Philippines, or a corporation or co-partnership,
association or joint-stock company constituted
and organized under the laws of the Philippines,
at least 60 per centum of its stock or paid-up
capital must belong entirely to citizens of the
Philippines;
(2) The applicant must be financially capable of
undertaking the proposed service and meeting
the responsibilities incident to its operation;
and
(3) The applicant must prove that the operation of
the public service proposed and the
authorization to do business will promote the
public interest in a proper and suitable manner.

Their must be proper notice and hearing before
PSC can exercise its power to issue a CPC.
DISTINGUISH PRIOR APPLICANT RULE/OLD OPERATOR
RULE/THIRD OPERATOR AND PROTECTION OF
INVESTMENT
RULE
PRIOR APPLICANT RULE – Where there are various
applicants for a public utility over the same territory, all
conditions being equal, priority in the filing of the
application for a certificate of public convenience
becomes an important factor in granting or refusal of a
certificate.
(1) those owned and/or operated by the Armed
Forces of the Philippines and by foreign
governments for military purposes, and
(2) bancas, sailboats and other waterborne
contrivance of less than three gross tons
capacity and not motorized.
 Under the mercantile code, vessels refer solely
and exclusively to merchant ships.
WAYS OF ACQUIRING OWNERSHIP OF VESSELS
Art. 573 – Merchant vessels constitute property which
may be acquired and transferred by any of the means
recognized by law. The acquisition of vessel must
appear in a written instrument which shall not produce
any effect with regard to the third persons if not
recorded in the registry of vessels.
The ownership of a vessel shall also be acquired
by possession thereof in good faith for three years*,
with a good title duly recorded.
In the absence of any of these requisites,
continuous possession for ten years shall be necessary
in order to acquire ownership.
Note: The “prescription adquisitiva” has been
amended by Art. 1132 of the Civil Code – good faith is 4
years and bad faith is 8 years.
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* donation, capture, sale, prescription and construction
PARTICIPANTS IN MARITIME COMMERCE
Art. 586 – The shipowner and the ship agent shall be
civilly liable for the acts of the captain and for all the
obligations contracted by the latter to repair, equip, and
provision the vessel, provided the creditor proves that
the amount claimed was invested therein.
By ship agent is understood the person
intrusted with the provisioning of a vessel, or who
represents her in the port in which she may be found.
Art. 587 – The ship agent shall also be civilly liable for
the indemnities in favor of third persons which arise
from the conduct of the captain in the vigilance over the
goods which the vessel carried; but he may exempt
himself therefrom by abandoning the vessel with all her
equipment and the freight he may have earned during
the voyage.




Shipowner
Ship agent
First Mate
Second Mate
Study the Limited Liability Rule and its exceptions
Page 345-346
Nature of Maritime Contracts
What is Charter Party?
A “charter-party” is defined as a contract by
which an entire ship or some principal part thereof, is
let by the owner to another person for a specified time
or use; a contract of affreightment by which the owner
of the ship or other vessel lets the whole or a part of
her to a merchant or other person for the conveyance
of goods, on a particular voyage, in consideration of the
payment of freight.
March 6, 2010
2. If the person from whom the vessel was
chartered should sell her before the charterer has
begun to load her and the purchaser should load her for
his own account.
In such case, the seller shall indemnify the
charterer for the damage he may suffer.
If the new owner of the vessel should not load
her for his own account, the charter party shall be
respected, and the seller shall indemnify the purchases
if the former did not notify him of the charter pending
at the time of making the sale.
DISTINGUISH
LOANS
ON
BOTTOMRY
RESPONDENTIA FROM A SIMPLE LOAN
OR
1.
In loan on bottomry or respondentia,
the rate of interest although beyond the awful rate of
interest is not subject to Usury Law, whereas in simple
loan, the rate of interest is subject to the said Law.
2.
In the former, there must be necessarily
exist a bona fide marine risk, whereas in the latter, the
existence of a marine risk or uncertainty of transactions
is not necessary.
3.
in the former, when the loan is made
during the voyage, the last lender has preference over
the previous one (the reason for this exception to the
general rule is that the last loan contributes the
preservation of the thing pledges), whereas in the
latter, the prior lender has a right of preference on the
security over the subsequent ones
4.
In the former, the contract must be
reduced at least to writing to give rise to judicial action,
whereas in the latter, said requisite is not always
necessary.
5.
In the former, the action pertaining to
the lender is extinguished by the absolute loss of the
effects on which the loan is made, whereas in the latter,
not extinguished, the lender reduced merely unsecured
creditor.
6.
In the former, the loan should be
recorded in the registry of vessels, to be effective
against third persons, whereas, in the latter,
registration is not necessary.
Classes thereof. Types of Charter parties.
WHAT IS AVERAGES? CLASSES OF AVERAGES.
Rights and obligations of Ship Owner or Ship Agent.
Rights and Obligations of Charterer;
GROUNDS FOR THE RESCISSION OF CHARTER PARTY
Art. 689 – At the request of the person from whom the
vessel is chartered, the charter party may be rescinded:
1. If the charterer, at the termination of the extra
lay days, does not place the cargo alongside the
vessel.
In such cases, the charterer must pay half of the
freight stipulated, besides the demurrage due for the
lay days and extra lay days.
Art. 806 – For the purposes of this Code the following
shall be considered averages:
1. All extraordinary or accidental expenses which
may be incurred during the voyage for the
preservation of the vessel or cargo, or both.
2. All damages or deterioration which the vessel
may suffer from the time she puts to sea at the
port of departure until she casts the anchor at
the port of destination, and those suffered by
the goods from the time they are loaded in the
port of shipment until they are unloaded in the
port of consignment.
Art. 808 – Averages shall be:
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1. Simple or particular – includes all the expenses
and damage caused to the vessel or to her
cargo which have not inured to the common
benefit and profit of all the persons interested
in the vessel and her cargo, x x x (Art. 809).
2. General or gross – as a general rule, include all
the damages and expenses which are
deliberately caused in order to save the vessel,
her cargo, or both at the same time, from a real
known risk, x x x (Art. 811).
Distinguish culpa aquilana, culpa criminal and culpa
contractual.
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