I.

Merchant Vessel

A. Defined

A merchant vessel is a vessel engaged in maritime commerce, whether foreign or otherwise.

B. Major Participants in Maritime Commerce

1. Ship Owner

A shipowner is the person who has possession, control and management of the vessel and the
consequent right to direct her navigation and receive the freight earned and paid, while his possession
continues.

If his ownership is a co-ownership with others, then a partnership is presumed established, and they
shall be governed by the rule of the majority - the co-owner with the smallest share being entitled to
one vote, and the others, that number of votes in proportion to the smallest.

The rule is well-entrenched that a shipowner may be held liable for injuries to passengers
notwithstanding the exclusively real and hypothecary nature of maritime law if fault can be attributed to
the shipowner (Negros vs. CA, 281 SCRA 534).

2. Ship Agent

A ship agent is a person entrusted with provisioning and representing the vessel in the port in which it
may be found.

The term “ship agent” also includes the shipowner (Chua vs. IAC, 166 SCRA 183)

a. Civil Liability of Ship Agent and/or Shipowner

As ship agent, it may be held civilly liable in certain instances such as for the acts of the captain and for
the obligations contracted by the latter to repair, equip, and provision the vessel, provided the creditor
proves that the amount claimed was invested for the benefit of the same, and for the indeM/Vities in
favor of third persons which may arise from the conduct of the captain in the care of the goods which he
loaded on the vessel; but he may exempt himself therefrom by abandoning the vessel with all her
equipments and the freight it may have earned during the voyage (Macondray vs. Provident, 445 SCRA
644).

Bar Question: Under a charter party, XXO Trading Company shipped sugar to Coca-Cola Company
through SS Negros Shipping Corp., insured by Capitol Insurance Company. The cargo arrived but with
shortages. Coca-Cola demanded from Capitol Insurance Co. Php 500,000 in settlement for XXO Trading.
The MM Regional Trial Court, where the civil suit was filed, absolved the insurance company, declaring
that under the Code of Commerce, the shipping agent is civilly liable for damages in favor of third
persons due to the conduct of the carrier’s captain, and the stipulation in the charter party exempting
the owner from liability is not against public policy. Coca-Cola appealed. Will its appeal prosper? Reason
briefly (2004 Bar)

Answer: No. The appeal will not prosper. The MM Regional Trial Court was correct in ruling that the claim
for damages must be against SS Negros Shipping Corp., the agent, because Article 587 of the Code of
Commerce makes the ship agent civilly liable for indeM/Vities suffered by third persons arising from acts
or omissions of the captain in the care of the goods.

The stipulation in the charter party absolving the owner from liability for loss due to the negligence of its
agent would be void if the strict public policy governing common carriers is applied. Such policy has no
force where the public at large is not involved, as in the case of a ship totally chartered for the use of a
single party. The stipulation exempting the owner from liability for the negligence of its agent is not
against public policy and is deemed valid (Home vs. American, 23 SCRA 24).

Abandonment of the vessel includes the following objects:

(1) the vessel itself,

(2) equipment,

(3) freightage, and

(4) insurance proceeds, if any (Chua vs. IAC, supra).

Repairs made on a vessel ultimately redound to the benefit of the new owner, for without said repairs,
the vessel will be unseaworthy. Such acts give rise to “solutio indebiti” under Article 2142 of the Civil
Code and should be paid by the party benefited (BPI vs. Pineda, 156 SCRA 404).

The ship agent is jointly and severally liable with its principal for loss or damage to the cargo. Its liability,
being maritime in nature, is limited by the value of the vessel, which also is the limit of the liability of its
principal under the doctrine of limited liability in maritime law (Switzerland vs. Ramirez, 96 SCRA 297).

Bar Question: “S” shipped goods from Australia on board a foreign vessel owned and operated by ‘X”,
a shipping company, based in Australia and represented in the Philippines by “R”. The goods were
consigned to “T” of Manila and insured by “U” against all risks. Upon arrival in Manila Bay, the goods
were discharged from the vessel to a lighter owned by the Bay Brokerage Company. When delivered to
and received by “T”, the goods were found to have sustained losses or damages. Evidence disclosed
that the damage occurred while the goods were in the custody of the carrier. The insurance company
paid the amount of the loss but sought reimbursement from “X” and/or “R”. “R” disclaimed any
liability alleging that he is a mere agent of ‘X”, and, having acted as agent of a disclosed principal is,
therefore, not liable.

(a) Can the insurance company recover from “R”? Reasons

(b) What is the liability, if any, of Bay Brokerage Company? Explain. (1981 Bar)
Answer: (a) Yes. The insurance company can recover from R. R is not a mere agent, but a ship agent for X
Shipping Company. As such ship agent, it is jointly and severally liable with its principal for loss or
damage to the cargo. The insurance company (U) therefore, has a choice of whether to run after X or R
for reimbursement of what it paid to T, the consignee of the goods.

It is therefore not a defense on R’s part that it is a mere agent of X and therefore not liable,
because R’s liability, as a ship agent, is solidary with that of X, its principal.

(b) Bay Brokerage Company, owner of the lighter which discharged the goods from X’s vessels,
has no liability for the damaged goods, it being evident that the goods got damaged while still in the
custody of the vessel owned and operated by X Company, and not while in the custody of the lighter
owned by Bay Brokerage Company.

Bar Question: X Mining Company shipped a cargo of machineries on board the S/S Good Ship which was
chartered by the Able Shipping Company, a foreign corporation represented in the Philippines by its
agent, Best Lines, Inc. When the goods were delivered to the consignee, Y Corporation, they were found
to have sustained losses. The insurer, Sunshine Insurance Company, paid for the losses, thereby
subrogating itself to the rights of X Mining Company or Y Corporation vis-a-vis the shipping company and
the shipping agent.

Upon arrival of the S/S Good Ship in Manila, Best Lines, Inc. took charge of the following:

(a) unloading of the cargo and issuing of cargo receipts in its own name for the purpose of
evidencing the condition and the discharge of the cargo from the vessel to the arrastre operator and/or
unto the barges/lighters;

(b) filing and processing of claims against the vessel S/S Good Ship for losses/damages sustained
by the cargo.

When Sunshine Insurance Company sued both Able Shipping Company and Best Lines, Inc., the latter
contended that it was a disclosed agent and could not therefore be held liable, despite the insolvency of
Able Shipping Company. Rule on the contention of Best Lines, Inc. with reasons. (1984 Bar)

Answer: Best Lines, Inc. is liable inspite of the fact that it was a disclosed agent, and regardless of the
financial condition of Able Shipping Company.

Best Lines, Inc. is not a mere agent but a ship agent of Able Shipping Company. Under the
admiralty law, a ship agent is solidarily liable with the owner of the vessel for losses or damages to the
cargo. Hence, Best Lines, Inc., as ship agent, is liable in spite of the insolvency of Able Shipping Company.

The maritime creditor may attach the vessel without waiting for the settlement of his right (Chua vs. IAC,
166 SCRA 183).
An agent of a charterer whose obligation under the charter contract is to unload the goods is not a ship
agent and therefore not solidarily liable for loss or damage to the goods during the voyage (Maritime vs.
CA, 187 SCRA 346).

b. Limited Liability or Hypothecary Rule

Bar Question: On October 30, 2007, M/V Pacific, a Philippine registered vessel owned by Cebu Shipping
Company (CSC), sank on her voyage from Hong Kong to Manila. Empire Assurance Company (Empire) is
the insurer of the lost cargoes loaded on board the vessel which were consigned to Debenhams
‘Company. After it indeM/Vified Debenhams, Empire as subrogee filed an action for damages against
CSC. a) Assume that the vessel was seaworthy. Before departing, the vessel was advised by the Japanese
Meteorological Center that it was safe to travel to its destination. But while at sea, the vessel received a
report of a typhoon moving within its general path. To avoid the typhoon, the vessel changed its course.
However, it was still at the fringe of the typhoon when it was repeatedly hit by huge waves, foundered
and eventually sank. The captain and the crew were saved except three (3) who perished. Is CSC liable to
Empire? What principle of maritime law is applicable? Explain. b) Assume that the vessel was not
seaworthy as in fact its hull had leaked, causing flooding in the vessel. Will your answer be the same?
Explain. (2008 Bar)

Answer: a) CSC cannot be held liable to Empire because the loss happened due to a fortuitous event.
There is no question that when party is unable to fulfill his obligation because of “force majeure,” the
general rule is that he cannot be held liable for damages for non- Performance (Japan vs. CA, 294 SCRA
19). Also, no further liability can be attributed to CSC pursuant to the hypothecary nature of the
obligation of the vessel. The real and hypothecary nature of maritime law simply means that the liability
of the carrier in connection with losses related to maritime contracts is confined to the vessel, which is
hypothecated for such obligations or which stands as the guaranty for their settlement. Thus, the liability
of the vessel owner and agent arising from the operation of such vessel were confined to the vessel
itself, its equipment, freight, and insurance, if any, which limitation served to induce capitalists into
effectively wagering their resources against the consideration of the large profits attainable in the trade
(Aboitiz vs. General, 217 SCRA 359).

b) No, my answer would be different. The doctrine of limited liability does not apply where there was
negligence on the part of the vessel owner or agent. CSC was at fault or negligent in not maintaining a
seaworthy vessel and in having allowed its vessel to sail. Since it was remiss in the performance of its
duties, CSC cannot hide behind the “limited liability” doctrine to escape responsibility for the loss of the
vessel and its cargo (See Loadstar vs. CA, 315 SCRA 339).
“No vessel, no liability” expresses in a nutshell the limited liability rule. The shipowner’s or agent’s
liability is merely co-extensive with his interest in the vessel such that a total loss thereof results in its
extinction. The total destruction of the vessel extinguishes maritime liens because there is no longer any
res to which it can attach (Monarch vs. CA, 333 SCRA 71).

Abandonment of a vessel is necessary to limit the liability of the shipowner or the ship agent to the value
of the vessel, its appurtenances and freightage exacted. The only instance where such abandonment is
dispensed with is where the vessel is entirely lost. In such a case, the obligation as a general rule is
thereby extinguished. Where the vessel, not being a total loss, is not abandoned by its owners, they are
liable to its creditors (Luzon vs. CA, 156 SCRA 169).

The basis of the liability of the vessel to the passengers is the contract of carriage, not tort, and the
vessel is liable for the negligence or wilful act of the carrier’s employees although they acted beyond the
scope of their authority, or even in violation of the carrier’s instructions. Damages may be imposed if the
carrier acted recklessly (Mecenas vs. CA, 180 SCRA 83).

The real and hypothecary nature of maritime law simply means that the liability of the carrier in
connection with losses related to maritime contracts is confined to the vessel, which is hypothecated for
such obligations or which stands as the guaranty for their settlement. Thus, the liability of the vessel
owner and agent arising from the operation of such vessel were confined to the vessel itself, its
equipment, freight, and insurance, if any, which limitation served to induce capitalists into effectively
wagering their resources against the consideration of the large profits attainable in the trade (Aboitiz vs.
General, 217 SCRA 359).

The only time the Limited Liability Rule does not apply is when there is an actual finding of negligence on
the part of the vessel owner or agent (Ibid.).

The rights of a vessel owner or agent under the Limited Liability Rule are akin to those of the rights of
shareholders to limited liability under our corporation law. In both insolvency of a corporation and the
sinking of a vessel, the claimants or creditors are limited in their recovery to the remaining value of
accessible assets. For corporation - the residual assets of the corporation left from its operations; for lost
vessel - the insurance proceeds and pending freightage for the particular voyage (Ibid.).

To limit petitioner’s liability to the amount of the insurance proceeds, it has the burden of showing that
the unseaworthiness of the vessel was not due to its fault or negligence. Where the shipowner fails to
overcome the presumption of negligence, the doctrine of limited liability cannot be applied (Aboitiz vs.
New India, 531 SCRA 134).

As a general rule, a ship owner’s liability is merely co-extensive with his interest in the vessel, except
where actual fault is attributable to the shipowner. Thus, as an exception to the limited liability doctrine,
a shipowner or ship agent may be held liable for damages when the sinking of the vessel is attributable
to the actual fault or negligence of the shipowner or its failure to ensure the seaworthiness of the vessel
(Aboitiz vs. CA, 569 SCRA 294).
Bar Question: Toni, a copra dealer, loaded 1,000 sacks of copra on board the vessel M/V Tonichi (a
common carrier engaged in coastwise trade owned by Ichi) for shipment from Puerto Galera to Manila.

The cargo did not reach Manila because the vessel capsized and sank with all its cargo.

When Toni sued Ichi for damages based on breach of contract, the latter invoked the “limited liability
rule.”

a. What do you understand of the “rule” invoked by Ichi?

b. Are there exceptions to the “limited liability rule”? (1997, 1994 Bar)

Answer:

a. Under the limited liability rule (real or hypothecary nature in maritime law), the liability of the
shipowner or ship agent is coextensive with the value of the vessel, its equipment including freight. If the
vessel is abandoned, said liability is extinguished and if the vessel is sank beyond recovery, the liability is
extinguished without prejudice to the insurer’s liability in appropriate cases.

b. The following are the exceptions:

1) where the vessel is insured;

2) where the claims are under the Workmen’s Compensation Laws or similar labor laws;

3) repairs on the vessel before its loss;

4) injury or damage due to the shipowner’s fault or to the concurrent negligence of the shipowner
and the captain (See Monarch vs. CA,- 333 SCRA 71).

Bar Question: MV Mariposa, one of five passenger ships owned by the Marina Navigation Company, sank
off the coast of Mindoro while en route to lloilo City. More than 200 passengers perished in the disaster.
Evidence showed that the ship captain ignored typhoon bulletins issued by PAGASA during the 24-hour
period immediately prior to the vessel’s departure from Manila. The bulletins warned all types of sea
crafts to avoid the typhoon’s expected path near Mindoro. To make matters worse, he took more load
than was allowed for the ship’s rated capacity. Sued for damages by the victim’s surviving relatives,
Marina Navigation Company contended (1) that its liability, if any, had been extinguished with the sinking
of MV Mariposa; and (2) that assuming it had not been so extinguished, such liability should be limited
to the loss of the cargo. Are these contentions meritorious in the context of applicable provisions of the
Code of Commerce? (2000, 1999, 1988, 1964 Bar)

Answer: The first contention of Marina Navigation Company is meritorious, but the second is not.
Under Art. 587 of the Code of Commerce, where the fault or negligence is committed solely by the
captain, a shipowner or agent has the right of abandonment, and by necessary implication, his liability is
confined to that which he is entitled as of right to abandon—the vessel with all the equipment and the
freight it may have earned during the voyage.

Since only the captain is at fault, the owner of the vessel is free from liability for loss of the cargo, as such
liability is limited to the extent of his interest in the ship. The total loss of the ship results in the total loss
of his interest in the same. However, his liability for loss of life to the passengers is governed by the Civil
Code which provides for his use of extraordinary diligence. The act of overloading the vessel is
negligence on the part of his agent making him liable to the heirs of the passengers under the contract
of transportation. The total loss of the vessel, even under the hypothecary rule, will not free him from
liability to passengers.

Bar Question: While docking, his vessel, “Taurus”, the master, thru negligence, damaged the wharf and
the merchandise loaded on the deck. The owner of the wharf and the owner of the damaged
merchandise sued the owner of the vessel and the master of the vessel for the damage.

1. What is the basis of the liability of the owner of the vessel with respect to the damage to the
wharf?

2. With respect to the damage to the merchandise?

3. Does the defense of the exercise of the diligence of a good father of a family lie? Reason.
(1986, 1976 Bar)

Answer: (1) The basis of liability of the owner of the vessel with respect to the damage to the wharf is
tort, the cause of it being the extra-contractual negligence of the master of the vessel.

(2) The basis of liability with respect to damage to the merchandise is the contract of carriage between
the owner of the vessel and the owners of the cargo. The obligation of the carrier to observe the proper
diligence starts from the time the carrier or his agent receives the cargo from the shipper or cargo owner
up to the time the goods are carried safely to their destination.

(3) The defense by the owner of the vessel of the exercise of diligence of a good father of a family in the
selection and supervision of his employees will lie with respect to the tort liability (damage to the
wharf), but will not lie with respect to the damage to the cargo, the reason being that common carriers,
like the merchant vessel Taurus, are imposed by law with the obligation to exercise extraordinary
diligence in the carriage of goods.

Bar Question: Thinking that the impending typhoon was still 24 hours away, MV Pioneer left port to sail
for Leyte. That was a miscalculation of the typhoon signals by both the ship-owner and the captain as
the typhoon came earlier and overtook the vessel. The vessel sank and a number of passengers
disappeared with it.

Relatives of the missing passengers claimed damages against the shipowner. The shipowner set up the
defense that under the doctrine of limited liability, his liability was co-extensive with his interest in the
vessel. As the vessel was totally lost, his liability had also been extinguished.

Assuming that the vessel was insured, may the claimants go after the insurance proceeds? (1999 Bar)

Answer: Yes, if the vessel is insured, the claimants may go after the insurance proceeds. This is one
exception under the doctrine of limited liability. The shipowner is still liable even if the vessel is lost.

Bar Question: In a collision between M/T Manila, a tanker, and M/V Don Claro, an interisland vessel, M/V
Don Claro sank and many of its passengers drowned and died. All its cargoes were lost. The collision
occurred at nighttime but the sea was calm, the weather fair and visibility was good. Prior to the
collision, and while still four (4) nautical miles apart, M/V Don Claro already sighted M/T Manila on its
radar screen. M/T Manila had no radar equipment. As for speed, M/V Don Claro was twice as fast as M/T
Manila.

At the time of the collision, M/T Manila failed to follow Rule 19 of the International Rules of the Road
which requires two (2) vessels meeting head on to change their course by each vessel steering to
starboard (right) so that each would pass by the port side (left) of the other. M/T Manila signaled that it
would turn to the portside and steered accordingly, thus resulting in the collision. M/V Don Claro’s
captain was off duty and was having a drink at the ship’s bar at the time of the collision.

a) Who would you hold liable for the collision?

b) If M/V Don Claro was at fault, may the heirs of the passengers who die and the owners of the cargoes
recover damages from the owner of said vessel? (1991 Bar)

Answer: a) Both M/T Manila and M/V Claro are guilty of negligence, hence, both are liable.

MT Manila failed to follow Rule 19 of the International Rules of the Road and did not have radar
equipment, while M/V Claro failed to keep a “proper lookout” as required by the International Rules of
the Road, and despite the fact that the captain was not under any disability at the time of the collision.

Since the collision is imputable to both vessels, each one shall suffer its own damages, but both are
solidarily liable for the death or injury of passengers and for the losses and damages occasioned to their
cargoes (Article 827, Code of Commerce).

b) Yes. The law provides that if a vessel should collide with another, through the fault, negligence or
lack of skill of the captain, the owner of the vessel at fault shall indeM/Vify the losses and
 damages suffered, after an expert appraisal (Article 826, Code of Commerce). The heirs of the
passengers who died and the cargo owners can therefore recover damages from the shipowner.

Bar Question: Two vessels collide due exclusively to the fault of one of them. The vessel at fault sinks in
water too deep for salvage operations; the other vessel is only partially damaged.

The vessel at fault being a total loss and uninsured, is her owner still legally bound to pay for the damage
caused to the other vessel?

And if there are unpaid bills for repairs done on the vessel at fault previous to the collision, may her
owner still be legally required to pay such bills? Reason out your answer. (2000, 1978, 1959, 1948 Bar)

Answer: The liability of the owner of a vessel involved in a collision generally is limited to his interest in
the vessel. When such vessel sunk due to its fault, the owner thereof continue to be liable to the other
vessel, as an exception to the limited liability rule.

Unpaid bills for repair of the vessel before it sank remain the liability of the shipowner, and is also an
exception to the limited liability rule.

Bar Question: A Japanese vessel plies between Manila and Tokyo carrying- lumber. It makes one trip
each month and receives P100,000 for freight alone. It began its trips in January, 1957. On the third
month and third trip, it collided with a Maritima vessel valued at P500,000, because of the negligence of
the Japanese vessel’s captain. The Maritima boat sank, and with it ten members of its crew. This
notwithstanding, the Japanese vessel continued its trip; this was in the month of March. In April it made
still another trip. In May, action was brought against the owners of the vessel, and when the vessel came
to the Philippines it was attached. In the action that ensued, the owner of the vessel was sentenced to
pay P500,000, and so the Japanese vessel was sold at public auction. But it could he sold only for
P300,000.

(a) How much is the owner of the Maritima boat entitled to receive, aside from the P300,000 realized
from the sale of Japanese vessel? (b) Are the heirs of the ten sailors who died entitled to receive any
amount, suppose the Workmen’s Compensation awards to them P5,000 for each of the dead sailor?
Reasons for answer. (1957 Bar)

Answer: (a) The owner of the Maritima boat is entitled to receive aside from the P300,000 realized from
the auction sale of the vessel at fault, the P100,000 earned from freightage on the voyage in March
1957, during which the collision occurred, after deducting payment to the heirs of the ten deceased crew
members.

The unpaid balance of the claim of the Maritima boat may still be recovered, considering that the
Japanese boat was negligent, hence still liable, under an exception to the limited liability rule.
(b) Yes, the heirs of the 10 sailors who died as a consequence of the total sinking of the ship are
entitled to be paid under the Workmen’s Compensation Act. They have a preferred right to all amounts
realized from the sale of the vessel at fault and from freightage. The Maritima vessel is entitled only to
the balance after the heirs of the 10 deceased crew members are paid.

C. Liabilities of Ship Agent and of Ship Owner for Acts Done by Captain Towards Passengers and
Cargoes, Making Them Solidarily Liable to Latter

(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 powers

(6) For deviations

(7) For arrivals under stress

(8) Damages due to non-observance of marine regulations

C. Charter Party

1. Defined

A charter party is a contract by virtue of which the owner or agent of a vessel binds himself to
transport merchandise or persons for a fixed price. It has also been defined as a contract by virtue of
which the owner or the agent of the vessel leases for a certain price the whole or a portion of the
vessel for the transportation of goods or persons from one port to another (SMC vs. Heirs, 384 SCRA
87).

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 a 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 (Caltex vs.
Sulpicio, 315 SCRA 709).

2. Nature

The Civil Code provisions on common carriers should not apply where the common carrier is not acting
as such but as a private carrier. A common carrier undertaking to carry a special cargo or chartered to a
special person only, becomes a private carrier. As a private carrier, a stipulation exempting the owner
from liability for the negligence of its agent is valid (Home vs. American, 23 SCRA 24).

3. Classes

a. Bareboat or Demise Charter

In a bareboat or demise charter, there is an entire surrender by the owner of the vessel to the charterer,
who provides the officers and the provisions. Entire control and management is given to the charterer.
The owner loses his lien for freight and is substituted by the charterer in whose favor the lien continues
to exist when goods are taken on freight (Ouano vs. CA, 211 SCRA 740).

Under the demise or bareboat charter of the vessel, the charterer will generally be considered as owner
for the voyage or service stipulated. The charterer mans the vessel with his own people and becomes, in
effect, the owner pro hac vice, subject to liability to others for damages caused by negligence. To create
a demise, the owner of a vessel must completely and exclusively relinquish possession, command and
navigation thereof to the charterer; anything short of such a complete transfer is a contract of
affreightment (time or voyage charter party) or not a charter party at all. The distinction is significant,
because a demise or bareboat charter indicates a business undertaking that is private in character.
Consequently, the rights and obligations of the parties to a contract of private carriage are governed
principally by their stipulations, not by the law on common carriers (Lea Mer vs. Malayan, 471 SCRA
698).

Stop here

Bar Question: For the transportation of its cargo from the Port of Manila to the Port of Kobe, Japan,
Osawa & Co., chartered “bareboat” M/V Ilog of Karagatan Corporation. M/V Ilog met a sea accident
resulting in the loss of the cargo and in the death of some of the seamen manning the vessel. Who
should bear the loss of the cargo and the death of the seamen? Why? (2003 Bar)

Answer: Osawa & Co., the charterer, should bear the loss of the cargo and the death of the seamen
because the transaction is a bareboat charter, wherein there is an entire surrender by the owner
(Karagatan) of the vessel to the charterer (Osawa). Entire control and management is given to the
charterer. The owner loses his lien for freight and is substituted by the charterer in whose favor the lien
continues to exist when goods are taken on freight. Should there be any loss, the charterer is liable for
the consequences of the voyage as if he were the owner except where the liability arises from
unseaworthiness

The said losses not being indicated in the case at bar as due to the unseaworthiness of the vessel, Osawa
& Co. should bear the consequences.
Bar Question: X owns the ship M/V Aguinaldo. He bareboat chartered the ship to Y who appointed all its
crew members from the captain down to its last official. Y then transported a shipment of 10,000 bags of
sugar belonging to Z. Thru the negligence of the ship captain, half of the sugar was damaged due to sea
water. Since Y is bankrupt, Z sued the captain and X. Will the suit succeed? (1988 Bar)

Answer: In a bareboat charter of a merchant vessel, the charterer is liable for the consequences of the
voyage as if he were the owner, except where the accident was due to the unseaworthiness of the
vessel.

The loss of part of the cargo due to the negligence of the captain is normally borne by the ship owner,
but because in this case, the boat is on bareboat charter to Y, he (Y) will be the one to bear the
consequences of the voyage, as if he were owner of the vessel.

Bar Question: Explain the meaning of “owner pro hac vice” of the vessel. In what kind of charter party
does this obtain? (1991 Bar)

Answer: An owner “pro hac vice” of the vessel means that a charterer, in spite of the fact the somebody
else is the true owner of the vessel, is treated as the owner of the chartered vessel, just for that one
particular purpose only. This situation exists in “demise” or “bareboat” charter, wherein the shipowner
turns over possession of the vessel to the charterer who then undertakes to provide a crew and victuals
and supplies and fuel for the vessel for the duration of the charter. 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.

c. Voyage Charter

In a voyage charter, it is usual for the parties to provide that responsibility for cargo loss falls
on the one who agreed to perform the duty involved. If the parties agreed that the charterer
would be responsible for the loading, stowage and discharging of the cargo at the ports
visited, while the owner was responsible for the care of the cargo during the voyage, and the
goods were shortlanded, this means that the loss took place on board the vessel before
unloading of the shipment, for which the owner will be answerable. However, goods damaged
or lost during the unloading is the liability of the charterer (Maritime vs. CA, 187 SCRA 346).

“In a time or voyage charter, in contrast to a bareboat charter, the ship remains a common or public
carrier. It is therefore imperative that a public carrier shall remain as such, notwithstanding the charter
of the whole or portion of a vessel by one or more persons, provided the charter is limited to the ship
only, as in the case of a time-charter or voyage-charter. It is only when the charter includes both the
vessel and its crew, as in a bareboat or demise, that a common carrier becomes private, at least insofar
as the particular voyage covering the charter-party is concerned (Caltex vs. Sulpicio, 315 SCRA 709).
Contract of affreightment is one in which the owner of the vessel leases part or all of its space to haul
goods for others. It is a contract for a special service to be rendered by the owner of the vessel and
under such contract the general owner retains the possession, command and navigation of the ship, the
charterer or freighter merely having use of the space in the vessel in return for his payment of the
charter hire. If the charter is a contract of affreightment, which leaves the general owner in possession of
the ship as owner for the voyage, the rights, responsibilities of ownership rest on the owner and the
charterer is usually free from liability to third persons in respect of the ship (Ibid.)

Contract of affreightment may either be time charter, wherein the vessel is leased to the charterer for a
fixed period of time, or voyage charter, wherein the ship is leased for a single voyage. In both cases, the
charter party provides for the hire of the vessel only, either for a determinate period of time or for a
single or consecutive voyage, the shipowner to supply the ship’s stores, pay for the wages of the master
and the crew, and defray the expenses for the maintenance of the ship (Caltex vs. Sulpicio, supra).

In a contract of affreightment, a common carrier is not converted into a private carrier but remains as a
common carrier and still liable us such (Coastwise vs. CA, 245 SCRA 796).

The charterer has no liability for damages under Philippine Maritime Laws (Caltex vs. Sulpicio, supra).

The charter party agreement did not convert the common carrier into a private carrier. The parties
entered into a voyage charter, which retains the character of the vessel as a common carrier (Ibid.).

4. Rights and Obligations of Ship Owner or Ship Agent

The rights and obligations of the shipowner/ship agent are:

(1) if vessel chartered wholly - not to accept cargo from others;

(2) to observe represented capacity;

(3) to unload cargo clandestinely placed;

(4) to substitute another vessel if load is less than 3/5 of capacity;

(5) to leave the port if the charterer does not bring the cargo within the lay days and extra lay days
allowed;

(6) to place the vessel in a condition to navigate, otherwise freightage lost; and

(7) to bring cargo to nearest neutral port in case of war or blockade.

The respective rights and duties of a shipper and the carrier depend not on whether the carrier is
public or private, but on whether the contract of carriage is a bill of lading or equivalent shipping
documents on the one hand, or a charter party or similar contract on the other (Caltex vs. Sulpicio, 315
SCRA 709).

The carriers are deemed to warrant impliedly the seaworthiness of the ship. For a vessel to be
seaworthy, it must be adequately equipped for the voyage and manned with a sufficient number of
competent officers and crew. The failure of a common carrier to maintain in seaworthy condition the
vessel involved in its contract of carriage is a clear breach of its duty prescribed in Article 1755 of the
Civil Code (Ibid.).

5. Rights and Obligations of Charterer

The rights and obligations of a charterer are:

(1) to pay the agreed charter price;

(2) to pay freightage on unboarded cargo;

(3) to pay losses to others for loading uncontracted cargo and illicit cargo;

(4) to wait if the vessel needs repair; and (5) to pay expenses for deviation.

Generally, private carriage is undertaken by special agreement and the carrier does not hold himself out
to carry goods for the general public. The most typical, although not the only form of private carriage, is
the charter party, a maritime contract by which the charterer, a party other than the shipowner, obtains
the use, and service of all or some part of a ship for a period of time or a voyage or voyages. The rights
and obligations of the parties are determined primarily by stipulations in their contract of private
carriage or charter party (National vs. CA, 283 SCRA 45).

Article 361 Code of Commerce provides, “Merchandise shall be transported at the risk and venture of
the shipper, if the contrary has not been expressly stipulated (Ibid.).

Deadfreight is the amount paid by or recoverable from a charterer of a ship for the portion of the ship’s
capacity the latter contracted for but failed to occupy. Liability for deadfreight is on the charterer (NFA
vs. CA, 311 SCRA 700).

Under the law, the cargo not loaded is considered dead freight. (Ibid.).
Demurrage is the sum fixed in a 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. Liability for demurrage, using the word in its strict technical sense, exists only when
expressly stipulated in the contract (Ibid.).

Delay in loading or unloading, to be deemed as a demurrage, runs against the charterer as soon as the
vessel is detained for an unreasonable length of time from the arrival of the vessel because no
available berthing space was provided for the vessel due to the negligence of the charterer or by
reason of circumstances caused by the fault of the charterer (Republic vs. Forbes, 659 SCRA 537).

In a contract of affreightment, the shipper or charterer merely contracts a vessel to carry its cargo with
the corresponding duty to provide for the berthing space for the loading or unloading. Charterer is
merely required to exercise ordinary diligence in ensuring that a berthing space be made available for
the vessel. The charterer does not make itself an absolute insurer against all events which cannot be
foreseen or are inevitable. The law only requires the exercise of due diligence on the part of the
charterer to scout or look for a berthing space (Ibid.).

The charterer of a vessel has no obligation before transporting its cargo to ensure that the vessel it
chartered complied with all legal requirements. The duty rests upon the common carrier simply for
being engaged in the “public service” (Caltex vs. Sulpicio, supra).

The relationship between the parties is governed by special laws. Because of the implied warranty of
seaworthiness, shippers of goods, when transacting with common carriers, are not expected to inquire
into the vessel’s seaworthiness, genuineness of its licenses and compliance with all maritime laws. To
demand more from shippers and hold them liable in case of failure exhibits nothing but the futility of
our maritime laws insofar as the protection of the public. By the same token, passengers cannot be
expected to inquire every time they board a common carrier, whether the carrier possesses the
necessary papers or that all the carrier’s employees are qualified. Such a practice would be an
absurdity in a business where time is always of the essence. Considering the nature of transportation
business, passengers and shippers alike customarily presume that common carriers possess all the
legal requisites in its operation (Ibid.).

6. Rescission of Charter Party

a. At Request of Charterer

The charter party may be rescinded at the request of the charterer:

(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 charterer’s disposal;

(4) return of the vessel due to pirates, enemies or bad weather; and

(5) arrival at a port for repairs.

b. At Ship Owner’s Request

The contract may be rescinded at the ship owner’s request:

(1) if the extra lay days terminate without the cargo being placed alongside the vessel; and

(2) sale by the owner of the vessel before loading by the charterer.

Bar Question: (A) The SAAD Development Corp. enters into a voyage charter with XYZ Shipping Corp.
over the latter’s vessel, the M/V Lady Love. Before the Saad Development Corp. could load it, XYZ
Shipping Corp. sold M/V Lady Love to Oslob Maritime Corp., which decided to load it for its own
account.

a. May XYZ Shipping Corp. validly ask for rescission of the charter party? If so, can SAAD
Development Corp. recover damages? To what extent?

b. If Oslob Maritime Corp. did not load it for its own account, is it bound by the charter? (1991 Bar)

Answer: (a) Yes, XYZ Shipping Co., the owner of the chartered boat, may validly ask for the rescission
of the charter party as this is one of the grounds for its rescission, at the instance of the owner, under
the Admiralty Law. If damages have been suffered as a consequence of the rescission of the contract,
the same may be recovered by the charterer from the owner of the boat.

(b) Oslob Maritime Corporation, not being a party to the charter party between XYZ Shipping and
SAAD Development Corp., cannot be compelled to load SAAD’s cargo for its own account and cannot
be held liable for damages, if any, suffered by SAAD.

c. Fortuitous Causes

The contract is also rescinded due to (1) war; (2) blockade; (3) prohibition to receive cargo; (4) embargo;
and (5) inability of the vessel to navigate.

D. Accidents and Damages in Maritime Commerce

1. Averages

a. Defined

Bar Question: What are averages in maritime commerce? (1961 Bar)

Answer: An average is an extraordinary or accidental expense incurred during the voyage in order to
preserve the cargo, the 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.

b. Classes

Bar Question: What are the types of averages in maritime commerce? (2010 Bar)

Answer:

1) Particular or Simple Average, which includes expenses and damages caused to the vessel or
cargo which have not inured to the common benefit; and

2) Gross or General Average, which include all 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.

1. Particular or Simple Average

Simple or particular average includes expenses and damages caused to the vessel or cargo which have
not inured to the common benefit, and borne by their respective owners.

Bar Question: A cargo of copra was loaded on board a Philippine vessel bound for Holland. The owner
of the vessel incurred the following expenditures in the course of the trip: P15,000 for repairs to the
hull due to a collision with another vessel in the Gulf of Aden; P10,000 for additional provisions for the
crew and passengers while repairs were being made; P10,000 for deterioration in the value of the
copra because of the delay caused by the repairs; and P10,000 for towing the vessel thru the Suez
Canal. By whom and in what amount shall each of the above expenses be borne? Reasons. (1966 Bar)

Answer: The repair expense of P15,000 is a particular average to be borne by the owner of the vessel,
without prejudice to said owner running after the other vessel, if negligent. The average is particular as it
was not deliberately incurred for common benefit.

The additional provision for the crew and passengers of P10,000 is also particular average and is borne
by the owner of the vessel. The expense is a consequence of the repair of the vessel, which itself is a
particular average.

The P10,000 deterioration in value of the copra is particular average to be borne by the copra owner. The
loss in value is not a consequence of a sacrifice for common benefit.

The towage expense of P10,000 is an ordinary expense incident to navigation and is borne by the owner
of the vessel.

Bar Question: M/V Ilog de Manila with a cargo of 500 tons of iron ore left the Port of Zambaoanga City
bound for Manila. For one reason or another, M/V Ilog de Manila hit a submerged obstacle causing it to
sink along with its cargo. A salvor, Salvador, Inc., was contracted to refloat the vessel for P1 million. What
kind of average was the refloating fee of P1 million, and for whose account should it be? Why? (2003
Bar)

Answer: The refloating fee is a particular average and should be borne by the owner of M/V llog de
Manila, since the refloating was a consequence of a maritime accident. In addition, nowhere in the case
at bar was it indicated that there was deliberate sacrifice on the part of the shipowner to save the ship
and/or cargo and succeeded in doing so, for the said refloating to be considered as a general average.

2. Gross or General Average

As a rule, general or gross averages include all 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 (Phil. Home
vs. CA, 257 SCRA 468).

Bar Question: Global Transport Services, Inc. (G TSI) operates a fleet of cargo vessels plying interisland
routes. One of its vessels, MV Dona Juana, left the port of Manila for Cebu laden with, among other
goods, 10,000 television sets consigned to Romualdo, a TV retailer in Cebu. When the vessel was
about ten nautical miles away from Manila, the ship captain heard on the radio that a typhoon which,
as announced by PAG-ASA, was on its way out of the country, had suddenly veered back into
Philippine territory. The captain realized that MV Dona Juana would traverse the storm’s path, but
decided to proceed with the voyage. True enough, the vessel sailed into the storm. The captain
ordered the jettison of the 10,000 television sets, along with some other cargo, in order to lighten the
vessel and make it easier to steer the vessel out of the path of the typhoon. Eventually, the vessel,
with its crew intact, arrived safely in Cebu.

a) Will you characterize the jettison of Romualdo’s TV sets as an average? If so, what kind of an
average, and why? If not, why not?

b) Against whom does Romualdo have a cause of action for indeM/Vity of his lost TV sets? Explain.
(2009 Bar)

Answer: a) Yes, the jettison of the TV sets resulted in a general average loss. As a rule, general or gross
averages include all 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 (Philippine Home vs. CA, 257 SCRA
468).

b) Romualdo has a cause of action against the shipowner and the other cargo owners bene fitted
by the jettison. Romualdo is entitled to indeM/Vity as a result of the loss of his TV sets
The requisites of general average are

(1) common danger;

(2) deliberate sacrifice;

(3) success; and

(4) proper formalities and legal steps.

Where the formalities prescribed under Articles 813 and 814 of the Code of Commerce in order to incur
the expenses and cause the damage corresponding to gross average were not complied with, the carrier
cannot claim for contribution from the consignees for additional freight and salvage charges (Ibid.).

Bar Question: The M/V Maliksi, laden with cargo, was on its way from Manila to Davao. Typhoon
Bebeng which had been last reported as leaving the Philippines area, suddenly changed its course
without giving enough time for warning and met M/V Maliksi with all her strength. In order to lighten
the vessel and prevent it from sinking, the captain, after taking the proper steps, decided to jettison
part of the cargo. Among those jettisoned were 20 barrels of petroleum which had been loaded on
deck with the consent of the shipper, Juan Reyes. Some big crates below deck were also jettisoned.

The storm gradually subsided and the M/V Maliksi, although it suffered some damage, remained
seaworthy and continued on its way to Davao. Visibility was still poor so that the vessel kept its light
on.

About two hours later, the captain and the crew of M/V Maliksi suddenly saw that another ship,
without any lights on, was a few meters away from its port side and apparently crossed its path. They
blew their whistles to warn the other vessel, at the same time trying to veer from its path. In spite of
this, the M/V Maliksi was hit on its port side and subsequently sank. It appeared that the watch of the
other vessel, the M/V Malakas, had fallen asleep.

The M/V Malakas took the captain and the crew of M/V Maliksi on board, and was able to salvage
part of the M/V Maliksi cargo and carried this also on board.

Discuss briefly the rights and/or liabilities, if any, of Juan Reyes, the owners of the crates jettisoned,
the owners of the cargo saved, and the owners of M/V Maliksi and M/V Malakas, respectively. (1983
Bar)

Answer:
(1) Juan Reyes, the owner of the jettisoned goods, is entitled under the provision of the law on general
average, to reimbursement of the value of his 20 barrels of petroleum, from those benefited by the
jettison - the owner of the vessel, and the owners of the goods which were saved as a consequence of
the sacrifice. The reimbursement however is not total, because Reyes also will proportionately
participate in the value of the goods sacrificed.

(2) The owners of the crates jettisoned will have the same rights and liabilities as Juan Reyes.

(3) The owners of the cargo saved will contribute to the reimbursement of the value of the goods
jettisoned belonging to Juan Reyes, the owners of the crates jettisoned, and the damage to M/V
Maliksi as a consequence of the typhoon. The reimbursement however is not total, as these persons
also will share in the sacrifice.

(4) The owner of M/V Maliksi, in so far as the general average is concerned, is entitled to
reimbursement for the damage to the vessel resulting from the typhoon, less his own share of the
sacrifice.

In so far as the collision is concerned, the M/V Malakas being the vessel at fault, its owner is liable to
the owner of M/V Maliksi for the value of M/V Maliksi, the vessel which sank, and also for the value
of the goods loaded on M/V Maliksi which were lost as a consequence of the collision.

Should no recovery be had from the owner of M/V Malakas, or should the recovery not be sufficient
to pay in full the owners of the goods saved from the typhoon, but lost in the collision, the owners of
the goods saved from both accidents (the typhoon and the collision) shall continue to be liable for
contribution to the general average, less expenses for the salvage, if any.

Bar Question: The vessel “General Mascardo” was loaded with 5,000 tons of gold and copper
concentrates by Syndicated Ores, Inc. (the charterer) for delivery to the U.S.. The master of the vessel
issued the corresponding bill of lading which contained a prohibition against the loading of dangerous
cargo per se or cargo which may become dangerous and make the voyage unsafe. The master has had
10 years of experience as a captain, but this was his first experience with cargo of gold and copper
concentrates. The cargo was loaded, stowed and trimmed at the sole risk and expense of Syndicated
Ores, Inc.. While en route to its destination, the vessel met a typhoon and because of the heavy stress,
the shifting boards or compartments constructed by Syndicated broke, causing the cargo of ore
concentrates to shift. Since the vessel was listing on its side to almost 14° for several hours, the
master, in the hope of saving the vessel, decided to jettison some cargo belonging to other shippers. At
this point, a powerful tugboat offered to help in maneuvering the vessel, which the master accepted
on no-cure, no-pay basis. To save the vessel and the remaining cargo, the master, after consulting with
his officers, deviated to Japan instead of proceeding to the U.S.. Thereafter, the cargo of gold and
copper concentrates were examined by international surveyors who declared that the moisture
content of said concentrates was beyond transportable limit and that the same was much higher than
as certified by Syndicated. The master and the shipowner, after, declaring that the cargo was of
dangerous nature and condition, unloaded the cargo in Japan, abandoned the voyage and informed
the cargo owners to transship their cargo at their own cost and expense. The master and the ship
owner also slapped a lien on said cargo for freight up to Japan as well as other expenses.

a. Was there a general average situation? Did the vessel have the right to jettison other cargo, hire
salvors and deviate the vessel to Japan?

b. Assuming Syndicated Ores, Inc. refused general average, may the vessel declare the cargo as
dangerous, unload the same, store the cargo in Japan and abandon the voyage, at the same time
slapping a lien on the cargo for freightage, expenses for unloading, expenses for jettison, salvage
and/or general average?

c. Does Syndicated Ores, Inc. have the right to insist that the vessel carry the cargo to the U. S. per bill
of lading or that the shipowner hire a substitute vessel to complete the contracted voyage in
accordance with the “extraordinary diligence” required of common carriers in the carriage of goods?
(1982 Bar)

Answer: (a) There was general average situation. The requisites of general average: (1) common
danger, (2) deliberate sacrifice, (3) success, and (4) proper formalities and legal steps, are all present in
the problem. The vessel had the right to jettison the cargo, hire salvors and deviate the vessel as part
of the emergency measures that had to be undertaken to save the vessel and the rest of the cargo
from further loss or damage.

(b) General average is a situation which is declared by the master of the vessel, after compliance with
the requirements. No particular shipper can refuse said declaration. The vessel, through its master,
after a declaration of general average, can proceed to declare the cargo as dangerous, unload the
same, store the cargo in Japan, abandon the voyage, and claim a lien on the cargo for freightage,
unloading expenses, for jettison, salvage and/or general average, these acts being the consequences
of the dangerous nature of the cargo of gold and copper concentrates.

(c) Syndicated Ores, Inc. cannot insist in the carriage of cargo to the U.S. per bill of lading or that the
ship owner should hire a substitute vessel in accordance with the “extraordinary diligence” of
common carriers in the carriage of goods because of the dangerous nature of the cargo carried. The
diligence required does not obligate the carrier to expose itself to dangerous risks outside of the
contemplation of the contract of carriage.

Bar Question: An importer of textiles loads 20 bales aboard a ship in Hong Kong bound for Manila.
With the intention of smuggling one-half of his cargo, he takes a bill of lading for only 10 bales. On the
voyage to Manila all the 20 bales are jettisoned to save the more precious cargo. How much is the
shipper entitled to receive as average? Reasons. (1966 Bar)
Answer: He can only claim for the value of the 10 bales which are included in the bill of lading. Only
that cargo included in the bill of lading which is jettisoned can be claimed as a general average.

Bar Question: “A” loaded on S.S. Liverpool belonging to “B” 300 cases of kerosene for consignment to
Tacloban, placing them on the deck and not in the hold of the vessel. While in transit, a strong storm
occurred and the captain, as a means of avoiding the danger of shipwreck, jettisoned the entire
shipment of kerosene belonging to “A”. Because of his precaution, the vessel was saved, but only 50
cases of kerosene jettisoned were recovered. Under what kind of average does the loss come? Who
pays for it? Give reasons for your answer. (1958 Bar)

Answer: The loss of the 250 cases of kerosene is a general average as the sacrifice was deliberately
made to save the vessel and the rest of the cargo.

The loss, being general average, is borne by all who benefited from the sacrifice, the owners of the
cargo, including A, and of the vessel.

Bar Question: Is the expense incurred in putting a vessel afloat general average? (1962 Bar)

Answer: If the vessel was intentionally stranded to save it and its cargo, then the expense for putting it
afloat is a general average; otherwise, it is a particular average especially where the stranding is a
consequence of an accident.

Bar Question: The vessel S/S Oriental left Manila bound for Cebu with stopover at Tacloban. Upon
leaving the latter port but still within its waters, the ship ran aground and could not move by its own
power; hence, so that the ship may proceed to Cebu, the shipowner had it refloated by another
shipping company at a compensation of P2,000.00. Does this expenditure constitute general average?
Explain your answer. (1955 Bar)

Answer: The expenditure does not constitute general average. The stranding of the ship was a
consequence of a maritime accident, and certainly it was not deliberately incurred to save the vessel
or its cargo. Hence, it is particular average, not general average.

Bar Question: MV SuperFast, a passenger-cargo vessel owned by SF Shipping Company plying the
inter-island routes, was on its way to Zamboanga City from the Manila port when it accidentally, and
without fault or negligence of anyone on the ship, hit a huge floating object. The accident caused
damage to the vessel and loss of an accompanying crated cargo of passenger PR. In order to lighten
the vessel and save it from sinking and in order to avoid risk of damage to or loss of the rest of the
shipped items (none of which was located on the deck), some had to be jettisoned. SF Shipping had
the vessel repaired at its port of destination. SF Shipping thereafter filed a complaint demanding all
the other cargo owners to share in the total repair costs incurred by the company and in the value of
the lost and jettisoned cargoes. In answer to the complaint, the shippers’ sole contention was that,
under the Code of Commerce, each damaged party should bear its or his own damage and those that
did not suffer any loss or damage were not obligated to make any contribution in favor of those who
did. Is the shippers’ contention valid? Explain. (2000 Bar)
Answer: No, the shippers’ contention is not valid. The jettisoning to save the vessel and the rest of the
cargo is a general average, hence those who benefited by reason thereof, namely, the owner of the
vessel and the owners of the goods which were saved, are obliged to reimburse the owner/s of the lost
and jettisoned cargo. SF Shipping Company, however, is not entitled to contribution from the cargo
owners for the damage to its vessel.

c. Proof and Liquidation

1. Where Made

Proof is made at the port of repairs, if any is made, or in the port of unloading. Liquidation is done in
the port of unloading if in the Philippines; or in the port of arrival, if in a foreign country.

Common carriers cannot limit their liability for injury or loss of goods where such injury or loss was
caused by its negligence. Otherwise stated, the law on averages under the Code of Commerce cannot
be applied where there is negligence (American vs. CA, 208 SCRA 343).

2. How Done

Liquidation is done by private agreement, or if the parties cannot agree, then by judicial authority.

2. Collisions

a. Terms Defined

Bar Question: Distinguish collision from allision. (1958 Bar)

Answer: Collision is the impact of two vessels, both of which are moving. Allision is the impact
between a moving vessel and a stationary one.

b. Zones of Time in the Collision of Vessels

Bar Question: In collisions between vessels at sea, explain the divisions or zones of time, and give the
rules to be observed where the steamship and a sailing vessel are approaching each other from opposite
directions or in intersecting lines. (1958 Bar)

Answer: In collision between vessels at sea, the zones of time are: first zone, which covers all the time up
to the moment when the risk of collision begins; second zone, which covers the time between the
moment when the risk of collision begins and the moment it becomes a practical certainty; and third
zone, which covers the time when collision is certain and the time of impact.
If a steamship and a sailing vessel approach each other from opposite directions, the sailing vessel
should keep her course, and the steamship should watch the movements of the sailing vessel and adjust
its own movements to the latter.

If they approach each other in intersecting lines, the steamship must give way.

Bar Question: In collision, explain the term “error in extremis,” (1958 Bar)

Answer: An “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 this sudden movement
is wrong, no responsibility will fall on said faultless vessel.

c. Rules as to Liability

1. One Vessel at Fault

The owner of the vessel at fault during the second zone and his ship agent are solidarily liable to the
owner of the innocent vessel and to the cargo owners for all of their losses and damages (National vs.
CA, 164 SCRA 593).

The vessel was negligent for two reasons: (1) it failed to follow Rule 18 (a) of the International Rules of
the Road by not altering her course to the starboard, and (2) it did not have a lookout properly trained
and who is given no other duty save to act as a lookout and who is stationed where he can see and hear
best and maintain good communication with the officer in charge of the vessel, and who of course must
be vigilant (Smith vs. CA, 197 SCRA 201).

Rule 24-C, Regulations for Preventing Collisions at the Sea, ruled that the duty to keep out of the way
remained even if the overtaking vessel cannot determine with certainty whether she is forward of or
abaft more than 2 points from the vessel. It is beyond cavil that M/V “Don Sulpicio” must assume
responsibility as it was in a better position to avoid collision. It should have blown its horn or given signs
to warn the other vessel that it was to overtake it (Sulpicio vs. CA, 305 SCRA 478).

2. Both Vessels at Fault

Bar Question: Two seagoing vessels, “A” and “B” were travelling at four o’clock in the afternoon, at full
speed, in clear weather, coming from opposite directions. They did not lessen their speed and both kept
their courses as they approached each other. The vessels collided and were both damaged. The cargoes
of both were also damaged.

Who is liable for the damage suffered by:

a. Vessel “A “;

b. Vessel “B”;

c. The cargoes in vessel “A”;

d. The cargoes in vessel “B’ (1995, 1947 Bar)

Answer: Both vessels in the problem are at fault. Consequently, vessel “A” bears its damage; vessel “B”
bears its damage; and the damage to the cargo in both vessels “A” and “B” will be borne solidarily by the
owners o vessels “A” and “B”.

Bar Question: There was a severe typhoon where the vessel M/V Fortuna collided with M/V Suerte. It is
conceded that the typhoon was a major cause of the collision, although there was a strong possibility
that it could have been avoided if the captain of M/V Fortuna was not drunk and the captain of M/V
Suerte was not asleep at the time of the collision.

Who should bear the damages to the vessels and their cargoes? (1998, 1987 Bar)

Answer: The owners of M/V Fortuna will bear the damage to their own vessel, while the owners of M/V
Suede will bear the damage to their own vessel.

The owners of both vessels will be jointly and severally liable to the owners of the cargo in both vessels.

These are the rules as to liability where both vessels are at fault.

While it is true that the major cause of the collision was the typhoon, it is equally true that the captain
of the M/V Fortuna was drunk, and the captain of the M/V Suede was asleep, at the time of the collision.
These acts of the captains are negligent acts which can result in a solidary liability of both vessels to the
cargo owners of both vessels.

For a fortuitous event like a typhoon to free a common carrier like the two vessels at bar from liability to
passengers and cargo owners, the fortuitous event should be the proximate and only cause for the loss.

As the cause of the loss is not solely the typhoon but the negligent acts of the captains of both vessels,
each vessel will bear its own damage, but both vessels will bear jointly and severally the damage to the
cargo of the vessels.

3. Fault Undeterminable

This is also called the principle of inscrutable fault --- it cannot be determined which between the two
vessels was at fault.

Both vessels bear their respective damage, but both are solidarily liable for damage to the cargo of both
vessels.

Bar Question: Explain the doctrine of Inscrutable Fault in Maritime accidents. (1997, 1995 Bar)

Answer: Under the doctrine of inscrutable fault, both vessels bear their respective damage in case of
collision where it cannot be determined which between the two vessels was at fault. However, under the
same doctrine, both should be solidarily liable for damage to the cargo of both vessels.
Bar Question: Vessels “U” and “V” collided with each other causing damage to both vessels. Vessel “U”
had the last clear chance to avoid the collision but failed to do so.

1. Is the doctrine of last clear chance in tort applicable to collisions of vessels at sea under the Code of
Commerce? Which vessel should shoulder liability for the damage suffered by both vessels and by the
cargo?

2. Assume that the negligence of the captain of Vessel “U” was the proximate cause of the collision,
while the negligence of the captain of Vessel “V” was merely contributory. To which vessel should the
collision be deemed imputable? (1980 Bar)

Answer: (1) The doctrine of “last clear chance” is not applicable to collisions of vessels. The Law on
Admiralty states that where both vessels involved in a collision are at fault, or it cannot be determined
which one is at fault (inscrutable fault), neither can successfully maintain a claim against each other for
loss or damage to their respective vessels. Besides an “error in extremis” of an otherwise K, faultless
vessel would not make the vessel liable to the other vessel.

Each vessel will shoulder the respective damage to their vessels, but both are solidarily liable for damage
or loss of cargo in both vessels.

(2) If both vessels are negligent, it does not matter that the negligence of one was the proximate cause,
and the negligence of the other was merely contributory. If both negligence existed during 1the second
time zone in collisions, then the collision will be imputable to both vessels, and both would become
solidarily liable for loss or damage to all owners of the cargo in both vessels, and each will bear the
damage to their respective vessels.

4. Collision Due to Fortuitous Event

Bar Question: Which party should bear the damage to the vessels and the cargoes if the cause of the
collision was a fortuitous event? Explain. (1995 Bar)

Answer: In case of a fortuitous event where none of the vessels is at fault, each vessel and each cargo
owner will bear their respective damages.

5. Collision of a Moving Vessel Against a Stationary Object

In American jurisprudence, there is a presumption of fault against a moving vessel that strikes a
stationary object such as a dock or navigational aid. In admiralty, this presumption does more than
merely require the ship to go forward and produce some evidence on the presumptive matter. The
moving vessel must show that it was without fault or that the collision was occasioned by the fault of the
stationary object or was the result of inevitable accident. Such vessel must exhaust every reasonable
possibility which the circumstances admit and show that in each, they did all that reasonable care
required. In the absence of sufficient proof in rebuttal, the presumption of fault attaches to a moving
vessel which collides with a fixed object and makes a prima fade case of fault against the vessel. Logic
and experience support this presumption (Far vs. CA, 297 SCRA 30).
d. Prerequisite to Recovery

Bar Question: Explain a maritime protest. When and where should it be filed? (2007, 1988, 1977 Bar)

Answer: A maritime protest is a written statement made under oath by the captain or master 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.

Protest is made within 24 hours before the competent authority at the place where the accident or
disaster happened or at the first port of arrival, if the Philippines; or to a Philippine consul, if the incident
took place abroad.

Injuries to persons and damage to the cargo of owners not on board on collision time need not be
protested.

Bar Question: On March 1, 1969 at about 10:00 P.M. and while entering the inner harbor of Manila, the
motorship “M/S Bulacan,” owned by Luzon Shipping Co., collided with the “M/S Iloilo” (a ship owned by
Visayas Shipping Corp.) which was at anchor. In the afternoon of March 2, 1969. Visayas Shipping Corp.
filed an action against Luzon Shipping Company for recovery of damages in the sum of P10,000 caused to
the “M/S Iloilo.” Will the action prosper? State your reasons. (1969 Bar)

Answer: No, the action will not prosper. Any action for damages arising from a collision should be
preceded by a protest, which must be filed within 24 hours from the time the collision took place before
the competent authorities at Manila where the collision took place.

Bar Question: In the morning of April 2, 1977, the South-bound FS-190 belonging to William Lines, Inc.
reached the waters of Verde Island Passage. About the same time, the M/S General del Pilar, another
interisland vessel owned by the General Shipping was likewise in the same waters, steaming northward
to Manila. The vessels, coming from opposite directions and towards each other, suddenly collided at a
certain point of the passage which resulted in the sinking of the FS- 190, together with all its cargoes,
part of which belonged to Tanya who is a paying passenger and Rafael who is a shipper.

Tanya and Rafael now bring action in court to recover for their losses and for damages arising from the
collision.

Were they under obligation to file a maritime protest for a successful maintenance of the action? (1977
Bar)

Answer: Tanya, being a mere passenger, and Rafael, a shipper of cargo not on board at the time of the
collision, are not required by the Admiralty Law to file a protest. After a collision, the person obliged to
file a maritime protest is the master (captain) of the vessel involved in the collision.