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UNCIANO, JENNY FLOR C. 2010-0048 A. Averages 1. Concept (Art. 806, CC) 2.

Classes of average and the persons liable a. Simple average (Art. 809-810, CC) b. General average (Art. 811, 812-813, 816-818, 732, 859861, CC) Collisions 1. Definition 2. Zones in collision (see: doctrine of error in extremis) 3. Rules on liability (Art. 826-832 CC; see: doctrine of inscrutable fault) 4. Limited liability rule (Art. 837, CC)

B.

A. AVERAGES 1. Concept Article 806 of the Code of Commerce provides that: 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 in order to preserve the vessel, the cargo, or both; 2. Any damages or deteriorations which the vessel may suffer from the time it puts to sea from the port of departure until it casts anchor in the port of destination, and those suffered by the merchandise from the time they are loaded in the port of shipment until they are unloaded in the port of their consignment.
2. Classes of average and the persons liable

Where both vessel and cargo are saved, it is general average; where only the vessel or only the cargo is saved, it is simple average.

a. Particular or Simple average

Article 809 of the Code of Commerce provides that: As a general rule, simple or particular averages shall include all the expenses and damages 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, and especially the following: 1. The losses suffered by the cargo from the time of its embarkation until it is unloaded, either on account of inherent defect of the goods or by reason of an accident of the sea or force majeure, and the expenses incurred to avoid and repair the same; 2. The losses and expenses suffered by the vessel in its hull, rigging, arms, and equipment, for the same causes and reasons, from the time it puts to sea from the port of departure until it anchors and lands in the port of destination; 3. The losses suffered by the merchandise loaded on deck, except in coastwise navigation, if the marine ordinances allow it; 4. The wages and victuals of the crew when the vessel is detained or embargoed by legitimate order or force majeure, if the charter has been contracted for a fixed sum for the voyage; 5. The necessary expenses on arrival at a port, in order to make repairs or secure provisions; 6. The lowest value of the goods sold by the captain in arrivals under stress for the payment of provisions and in order to save the crew, or to meet any other need of the vessel, against which the proper amount shall be charged; 7. The victuals and wages of the crew while the vessel is in quarantine; 8. The loss inflicted upon the vessel or cargo by reason of an impact or collision with another, if it is accidental and unavoidable. If the accident should occur through the fault or negligence of the captain, the latter shall be liable for all the losses caused;

9. Any loss suffered by the cargo through the fault, negligence, or barratry of the captain or of the crew, without prejudice to the right of the owner to recover the corresponding indemnity from the captain, the vessel, and the freightage. General Rule: No reimbursement. Principle: Loss will lie where it falls. Reason: There was no common benefit. Exception: if there is insurance Exception to the Exception: Stipulated in the insurance policy stating no liability on the part of the insurer regarding particular average. Article 810 of the Code of Commerce provides that: The owner of the goods which gave rise to the expense or suffered the damage shall bear the simple or particular averages. Q: Who is liable? A: Owner of the goods b. General average Includes all damages and expenses, which are deliberately caused in order to save the vessel and/or its cargo from real and known risk resulting in a common benefit. Thes expenses and damages shall be borne ratably among all those having interest in the vessel and cargo at the time of the occurrence of the 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. Magasaysay, Inc. vs. Agan, 967 Phil 504 [1955])

Article 811 of the Code of Commerce provides that: As a general rule, general or gross averages shall include all the damages and expenses which are deliberately caused in order to save the vessel, its cargo, or both at the same time, from a real and known risk, and particularly the following: 1. The goods or cash invested in the redemption of the vessel or of the cargo captured by enemies, privateers, or pirates, and the provisions, wages, and expenses of the vessel detained during the time the settlement or redemption is being made; 2. The goods jettisoned to lighten the vessel, whether they belong to the cargo, to the vessel, or to the crew, and the damage suffered through said act by the goods which are kept on board; 3. The cables and masts which are cut or rendered useless, the anchors and the chains which are abandoned, in order to save the cargo, the vessel, or both; 4. The expenses of removing or transferring a portion of the cargo in order to lighten the vessel and place it in condition to enter a port or roadstead, and the damage resulting therefrom to the goods removed or transferred; 5. The damage suffered by the goods of the cargo by the opening made in the vessel in order to drain it and prevent its sinking; 6. The expenses caused in order to float a vessel intentionally stranded for the purpose of saving it; 7. The damage caused to the vessel which had to be opened, scuttled or broken in order to save the cargo; 8. The expenses for the treatment and subsistence of the members of the crew who may have been wounded or crippled in defending or saving the vessel; 9. The wages of any member of the crew held as hostage by enemies, privateers, or pirates, and the necessary expenses which he may incur in his imprisonment, until he is returned to the vessel or to his domicile, should he prefer it;

10. The wages and victuals of the crew of a vessel chartered by the month, during the time that it is embargoed or detained by force majeure or by order of the government, or in order to repair the damage caused for the common benefit; 11. The depreciation resulting in the value of the goods sold at arrival under stress in order to repair the vessel by reason of gross average; 12. The expenses of the liquidation of the average.

Article 812 of the Code of Commerce provides that: In order to satisfy the amount of the gross or general averages, all the persons having an interest in the vessel and cargo therein at the time of the occurrence of the average shall contribute. Article 813 of the Code of Commerce provides that: In order to incur the expenses and cause the damages corresponding to gross average, there must be a resolution of the captain, adopted after deliberation with the sailing mate and other officers of the vessel, and after hearing the persons interested in the cargo who may be present. If the latter shall object, and the captain and officers or a majority of them, or the captain, if opposed to the majority, should consider certain measures necessary, they may be executed under his responsibility, without prejudice to the right of the shippers to proceed against the captain before the competent judge or court, if they can prove that he acted with malice, lack of skill, or negligence. If the persons interested in the cargo, being on board the vessel, have not been heard, they shall not contribute to the gross average, their share being chargeable against the captain, unless the urgency of the case should be such that the time necessary for previous deliberations was wanting. Article 816 of the Code of Commerce states that: In order that the goods jettisoned may be included in the gross average and the owners thereof be entitled to indemnity, it shall be necessary insofar as the cargo is concerned that their existence on board be proven by means of the bill of lading; and with regard to those belonging to the vessel, by means of the inventory prepared before the departure in accordance with the first paragraph of Article 812.

Article 817 of the Code of Commerce states that: if in lightning a vessel on account of a storm, in order to facilitate its entry into a port or roadstead, part of the cargo should be transferred to lighters or barges and be lost, the owner of said part shall be entitled to indemnity, as if the loss had originated from a gross average, the amount thereof being distributed between the vessel and cargo from which it came. If, on the contrary, the merchandise transferred should be saved and the vessel should be lost, no liability may be demanded of the salvage. Article 818 of the Code of Commerce states that: If, as a necessary measure to extinguish a fire in port, roadstead, creek, or bay, it should be decided to sink any vessel, this loss shall be considered gross average, to which the vessels saved shall contribute. Article 732 of the Code of Commerce provides that: Lenders on bottomry or respondentia shall suffer, in proportion to their respective interest, the general average which may take place in the goods on which the loan is made. In particular averages, in the absence of an express agreement between the contracting parties, the lender on bottomry or respondentia shall also contribute in proportion to his respective interest, should it not belong to the kind of risks excepted in the foregoing article. Article 859 of the Code of Commerce provides that: The insurers of the vessel of the freightage, and of the cargo shall be obliged to pay for the indemnification of the gross average, insofar as is required of each one of these objects respectively. Article 860 of the Code of Commerce provides that: If, notwithstanding the jettison of merchandise, breakage of masts, ropes, and equipment, the vessel should be lost running the same risk, no contribution whatsoever by reason of gross average shall be proper. The owners of the goods saved shall not be liable for the indemnification of those jettisoned, lost, or damaged. Article 861 of the Code of Commerce provides that: If, after the vessel has been saved from the risk which gave rise to the jettison, it should be lost through another accident taking place

during the voyage, the goods saved and existing from the first risk shall continue liable to contribution by reason of the gross average according to their value in the condition in which they may be found, deducting the expenses incurred in saving them. Remedy: Reimbursement General Rule: The sacrifice made must be in the course of the voyage. Exceptions: General average exists even if there is no voyage yet: 1. Article 817 of the Code of Commerce which covers fire in the port; and 2. Article 818 of the Code of Commerce which covers transfer of cargo to another vessel for the necessity to enter another port.

Requisites: 1. Common danger Exposure to common danger to ship and the cargo after it has been loaded whether during voyage or port of loading and unloading; 2. Deliberate Sacrifice That for the common safety part of the vessel or the cargo or both is sacrificed deliberately; 3. Success That from the expenses or damages caused follows the successful saving of the vessel and cargo; 4. Proper Formalities and Legal Steps That the expenses or damages should have been incurred or inflicted after taking legal steps and authority Formalities: 1. There must be a resolution of the captain, adopted after a deliberation with the other officers of the vessel and after hearing all persons interested in the cargoes. If the latter disagree, the decision of the captain should prevail but they shall register their objections.

2. The resolution must be entered in the logbook, stating the reasons and motives for the dissent, and the irresistible and urgent causes if he acted in his own accord. It must be signed, in the first case, by all persons present in the hearing. In the second case, by the captain and all the officers of the vessel. The minutes must also contain a detail of all the goods jettisoned and those injuries caused to those on board. Goods Not Covered By General Average Even If Sacrificed 1. Goods carried on deck. 2. Goods not recorded in the books or records of the vessel. 3. Fuel for the vessel if there is more than sufficient fuel for the voyage. Jettison- the act of throwing cargo overboard in order to lighten the vessel. B. COLLISIONS 1. Definition Collision is an impact of two vessels both of which are moving. Allision is an impact between a moving vessel and a stationary one. Possible damage: a. Damage to vessel b. Loss/damage to cargo c. Injury or death of passenger Example: Q: A and B collided, A was found to be negligent, who bears the consequential damages? A: A shall be liable for the consequential damages for she is at fault. Q: What if A and B were found to be negligent, who bears the consequential damages? A: With regard to the vessel, each vessel shall be liable for their own losses. With regard to the cargoes and passengers, they are solidarily liable.
2. Zones in Collision (Doctrine of error in extremis)

*Knowing these zones are important for liability purposes. 1. First zone all time up to the moment when risk of collision begins 2. Second zone time between moment when risk of collision begins and moment it becomes a practical certainty. *It is in this period where conduct of the vessels is primordial. It is in this zone that vessels must strictly observe nautical rules unless a departure therefrom becomes necessary to avoid imminent danger. 3. Third zone time when collision is certain and time of impact. *An error in this zone would no longer be legally consequential. Doctrine of Error in Extremis is a sudden movement made by a faultless vessel during the third zone of collision with another vessel which is at fault during the second zone. Even if such sudden movement is wrong, no responsibility will fall on said faultless vessel. Doctrine of Last Clear Chance provides that a negligent defendant is held liable to a negligent plaintiff or even to a plaintiff who has been grossly negligent where he should have been aware of it in the reasonable exercise of due care, had in fact an opportunity later than that of the plaintiff to avoid an accident. *In this doctrine, both parties are at fault but only one party is liable. Only the party who has the last clear opportunity to avoid the impact is held liable. *This doctrine is inapplicable in the following instances: 1. If the suit is between a parties of contract of carriage; and 2. In case of collision of vessels
3. Rule on Liability (1)Article 826 of the Code of Commerce provides that: If a

vessel should collide with another, through the fault, negligence, or lack of skill of the captain, sailing mate, or any other member of the complement, the owner of the vessel at fault shall indemnify the losses and damages suffered, after an expert appraisal. The collision may be due to the fault, negligenceor lack of skill of the captain, sailing mate, or any other member of the

complement of the vessel. The owner of the vessel at fault may be liable for losses or damages.
(2)Article 827 of the Code of Commerce provides that: If the

collision is imputable to both vessels, each one shall suffer its own damages, and both shall be solidarily responsible for the losses and damages occasioned to their cargoes. The collision may be due to the fault of bithe vessels. Each vessel shall suffer its own losses, but as regards the owner of cargoes both vesselsshall be jointly and severally liable. *This is known as the Doctrine of Inscrutable Fault. Doctrine of Inscrutable Fault provides that 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. (3)Article 828 of the Code of Commerce states that: The provisions of the preceding article are applicable to the use in which it cannot be determined which of the two vessels has caused the collision. If it cannot be determined which vessel is at fault, each vessel shall also sufer its own losses and both shall be solidarily liable for losses or damages on the cargoes. Article 829 of the Code of Commerce states that: In the cases above mentioned the civil action of the owner against the person causing the injury as well as the criminal liabilities, which may be proper, are reserved. Article 830 of the Code of Commerce states that: If a vessel should collide with another, through fortuitous event or force majeure, each vessel and its cargo shall bear its own damages. Requisites: 1. The natural disaster must have been the proximate and only cause of the loss; 2. The common carrier must have exercised due diligence to prevent or minimize loss before, during and after the occurrence of the natural disaster; 3. The common carrier must not have been guilty of delay; and

4. The captain must have made a protest before the competent authority at the first port he touched within the 24 hours following his arrival, and should have ratified it within the same period when he arrived at the port of destination, proceeding immediately with the proof of the facts, without opening the hatches until after this has been done. (4) The vessels may collide with each other through fortuitous event or force majeure. In this case, each shall bear its own damage. (5) Article 831 of the Code of Commerce provides that: If a vessel should be forced by a third vessel to collide with another, the owner of the third vessel shall indemnify the losses and damages caused, the captain thereof being civilly liable to said owner. Two vessels may collide with each other without their fault by reason of a third vessel. The third vessel will be liable for losses and damages. * This is known as the Doctrine of Proximate Cause
(6) Article 832 of the Code of Commerce states that: If by reason

of a storm or other cause of force majeure, a vessel which is properly anchored and moored should collide with those nearby, causing them damages, the injury occasioned shall be considered as particular average of the vessel run into. A vessel which is properly anchored and moored may collide with those nearby, by reason of storm or other cause of force majeure. The vessel run into shall suffer its own damage and expense.
4. Limited Liability Rule

*There must be no fault on the part of the shipowner. *The fault falls only with his crew.

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 vs. Escano, 156 SCRA 169 [1987]). The interest extends to: 1. The vessel itself; 2. Equipments; 3. Freightage; 4. Insurance proceeds. ( Chua vs. IAC, 166 SCRA 183 [ 1988])

Exceptions: When not applicable: 1. The voyage is not maririme, but only in river, bay or gulf. 2. In case of expense for equipping, repairing or provisioning of the vessel. 3. In case the vesselisnot common but a special carrier. 4. In case the vessel would totally sink or get lost by reason of the ship owner or ship agents fault. 5. When the injury to or death of a passenger is due either to the fault of the ship owner and the captain. 6. When the vessel is insured ( to the extent of the insurance proceeds); or 7. In workmens compensation claims. ( Yangco vs. Laserna, 73 Phil 330)

When shipowner was equally negligent, it cannot escape liability by virtue of the limited liability rule ( Central Shipping Co. vs INsurnace Co. Of N. America, GR No. 150751, September 20, 2004.) The limited liability doctrine applies not only to the goods but also in all cases like death or injury to passengers. ( Heirs of Amparo Delos Santos vs. CA, 186 SCRA 649)

Article 837 of the Code of Commerce states that: The civil liability incurred by the shipowners in the case prescribed in this section, shall be understood as limited to the value of the vessel with all its appurtenances and freightage.