Contract of Transportation – there is a contract of transportation when a person obligates himself to

transport persons or property from one place to another for a consideration. The contract may involve
carriage of passengers or carriage of goods. The person who obligates himself to transport the goods or
passengers may be a common or private carrier.

Contract of Carriage – one whereby a certain person or association of persons obligate themselves to
transport persons, things, or news from one place to another for a fixed price.

Parties – depends whether it is for carriage of passengers or goods

Carriage of passengers – Common carrier and passenger. The Supreme Court explained that only the
operator can breach the contract of carriage. Hence, it is only the operator who can be sued by the
passenger. The driver is not a party to the contract. The obligation to carry the passenger to her
destination is with the operator. The Court cited the previous ruling in Soberano v. Manila Railroad Co."
to the effect that a complaint for breach of a contract of carriage should be dismissed against the
employee who was driving the bus because the parties to the contract of carriage are only the
passenger and the bus owner/ operator.

Passenger – one who travels in a public conveyance by virtue of a contract, express or implied, with the
carrier as to the payment of a fare or that which is accepted as an equivalent thereof.

- Even when a passenger is being carried gratuitously or under reduced fare, he is still
considered as such.
- Article 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. The
reduction of fare does not justify any limitation of the common carrier’s liability.

Carriage of goods – Shipper and carrier

- The shipper is the person who delivers the goods to the carrier for transportation. He is the
person who pays the consideration or on whose behalf payment is made
- Consignee is the person to whom the goods are to be delivered. It may be the shipper
himself or a third person not a party in the contract. He can be bound by the contract if he
accepted the agreement.

Subcontractor - If the carrier sub-contracts the transportation of goods or hire another to transport the
goods, the sub-contractor is not directly liable to the consignee for the loss of the cargo if the cause of
action is for breach of contract. The carrier remains liable to the shipper/consignee; there is no privity of
contract between the shipper/consignee and the sub-contractor. However, the carrier has the right to
be reimbursed by the sub-contractor for whatever damages that it may be made to pay to the consignee
due to the fault of the sub-contractor. The sub-contractor is the carrier of the carrier.

Two types of contracts of carriage

1. Contract to Carry – agreement to carry the passenger at some future date. The contract is
consensual and is perfected by mere consent.
2. Contract of carriage or common carriage – considered as a real contract for not until the
facilities of the carrier are actually used can the carrier be said to have already assumed the
obligation of the carrier.
Elements

The essential requisites of a valid contract are: (1) consent, (2) object, and (3) consideration. In a
contract of carriage, consent is given by the carrier on one hand and the passenger or the shipper as the
case may be. The consideration for the carrier is the fare or freight to be paid by the passenger or
shipper. The consideration for the passenger or the shipper is the promise to transport the passenger or
the goods. The object of the contract is the prestation which is the transportation of the passenger or
goods from one place to another.

Perfection of contract of carriage of goods

- There may be a consensual contract to carry goods whereby the carrier agrees to accept and
transport goods at some future date
- But the act of delivery of the goods, that is when the goods are unconditionally placed in
possession and control of the carrier, and upon their receipt by the carrier for the
transportation, the contract of carriage is perfected.
- Verbal contract to carry is already a binding consensual contract
- The presence of a ticket or a bill of lading or any written contract is not necessary for the
perfection of the contract of carriage. The Code does not demand, as necessary requisite in
the contract of transportation, the delivery of the bill of lading to the shipper, but gives right
to the carrier and the shipper to mutually demand of each other the delivery of said bill.

Aircraft

- there is perfected contract even if no tickets have been issued as long as there is meeting of
minds with respect to consideration and subject. There is perfected contract of carriage
between a passenger and an airline if it can be established that the passenger had checked
in at the departure counter, passed through customs and immigration, boarded the shuttle
bus and proceeded to the ramp of the aircraft and that his baggage had already been loaded
in the aircraft to be flown with the passenger to his destination."

Bus, Jeepneys, and street cars

- Once a utility bus stops, it is in effect making a continuous offer to bus riders. It the duty of
the drivers to stop their conveyances for a reasonable length of time in order to afford
passengers an opportunity to board and enter. Passengers are deemed to be accepting the
offer if he is already attempting to board the conveyances and the contract is perfected
from that point.

Trains

- A person who wants to board a train in a railway station must purchase a ticket and must
present himself at the proper place and in a proper manner for transportation. Such person
must have a bona fide intention to use the facilities of the carrier, possess sufficient fare
with which to pay for his passage, and present himself to the carrier for transportation in
the place and manner provided. If he does not do so, he will not be considered a passenger.
- If you did not purchase a ticket, you are not a passenger.
Common carrier

PACF Article 1732 of the Civil Code of the Philippines [CCP] defines a common carrier as a person,
corporation, firm or associations engaged in the business of carrying or transporting passengers or
goods, or both, by land, water or air, for compensation, offering their services to the public.

- One that holds itself out as ready to engage in the transportation of goods for hire as a
public employment and not as a causal occupation.
- Public service act (CA 1416) partially supplements the law on common carrier

Test for determining whether a party is a common carrier of goods:

1. He must be engaged in the business of carrying goods for others as a public employment, and
must hold himself out as ready to engage in the transportation of goods for person generally as
a business and not as a casual occupation;
2. He must undertake to carry goods of the kind to which his business is confined;
3. He must undertake to carry by the method by which his business is conducted and over his
established roads; and
4. The transportation must be for hire.

Jurisprudence: Beach resorts who included the transportation in their tour packages are deemed to be a
common carrier

Characteristics:

1. Article 1732 makes no distinction between one whose principal business activity in the carrying
of persons or goods or both, and one who does such carrying only as an ancillary activity (in local
idiom, as "a sideline")
2. Article 1732 also carefully avoids making any distinction between a person or enterprise offering
transportation service on a regular or scheduled basis and one offering such service on an
occasional, episodic or unscheduled basis.
3. Article 1732 does not distinguish between a carrier offering its services to the "general public,"
i.e., the general community or population, and one who offers services or solicits business only
from a narrow segment of the general population.
4. A person or entity is a common carrier and has the obligations of the common carrier under the
Civil Code even if he did not secure a Certificate of Public Convenience.
5. The Civil Code makes no distinction as to the means of transporting, as long as it is by land,
water or air.
6. The Civil Code does not provide that the transportation should be by motor vehicle.
7. A person or entity may be a common carrier even if he has no fixed and publicly known route,
maintains no terminals, and issues no tickets.
8. A person or entity need not be engaged in the business of public transportation for the
provisions of the Civil Code on common carriers to apply to them.
9. The carrier can also be a common carrier even if the operator does not own the vehicle or vessel
that he or she operates or has to actually hire one."
10. The carrier can also be a common carrier even if the operator sub-contracts the carriage of
goods to another entity."
Ancillary business

Jurisprudence: Thus, even if the transportation of goods was ancillary to the main business of buying
and selling used bottles and scrap metals, the Supreme Court considered the private respondent a
common carrier.

Although the carrier has limited clientele, it is still considered as common carrier. Petitioner was
considered a common carrier whether its business of carrying of goods is done on an irregular basis
rather than scheduled manner and with a limited clientele. A common carrier need not have a fixed and
publicly known route nor does it have to maintain terminals or issue tickets.

Pipeline operators are considered as common carrier even when the oil is transported through a pipe
and not a motor vehicle.

Effect of charter party

- May transform a common carrier into a private carrier

- But it must be a bareboat or demise charter where the charterer mans the vessel with his
own people and becomes in effect the owner for the voyage or service stipulated
- 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.

Difference between charter party and common carrier

Charter parties are of two types: (a) contract of affreightment which involves the use of shipping space
on vessels leased by the owner in part or as a whole, to carry goods for others; and (b) charter by
demise or bareboat charter, by the terms of which the whole vessel is let to the charterer with a transfer
to him of its entire command and possession and consequent control over its navigation, including the
master and the crew, who are his servants. 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.

Upon the other hand, the term 'common or public carrier' is defined in Art. 1732 of the Civil Code. The
definition extends to carriers either by land, air or water which hold themselves out as ready to engage
in carrying goods or transporting passengers or both for compensation as a public employment and not
as a casual occupation. The distinction between a 'common or public carrier' and a 'private or special
carrier' lies in the character of the business, such that if the undertaking is a single transaction, not a
part of the general business or occupation, although involving the carriage of goods for a fee, the person
or corporation offering such service is a private carrier.

Common carrier vs Private carrier

The distinction between a "common or public carrier" and a "private or special carrier" lies in the
character of the business, such that if the undertaking is a single transaction, not a part of a general
business or occupation, although involving the carriage of the goods for a fee, the person or corporation
offering such service is a private carrier."

Example: If a person agrees to carry a person to the airport using his privately-owned car that is meant
for personal use, he will be considered a private carrier.

Jurisprudence: In National Steel Corporation v. Court of Appeals" the vessel involved, the MV Vlasons I,
rendered tramping services and, as such, does not transport cargo or shipment for the general public. Its
services are available only to specific persons who enter into a special contract of charter party with its
owner. Consequently, the carrier was considered a private carrier by the Supreme Court explaining that.

"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."

...in a contract of private carriage, the parties may freely stipulate their duties and obligations, which
perforce would be binding on them. Unlike in a contract involving a common carrier, private carriage
does not involve the general public. Hence, the stringent provisions of the Civil Code on common
carriers protecting the general public cannot justifiably be applied to a ship transporting commercial
goods as a private carrier. Consequently, the public policy embodied therein is not contravened by
stipulations in a charter party that lessen or remove the protection given by law in contracts involving
common carriers."

NOTE: It follows that while a common carrier is bound to exercise extraordinary diligence, a private
carrier owes only diligence of a good father of a family. Moreover, while a common carrier cannot
stipulate that it is exempt from liability for the negligence of its agents or employees, a private carrier
may validly enter into such stipulation. The stipulation involving a common carrier is void for being
contrary to public policy. There is no presumption on the part of the private carrier. He who alleges
negligence must prove such negligence.

I would reply to LMC that it may not be held liable for the death of AB. A stipulation with private carrier
that would disclaim responsibility for simple negligence of the carrier's employees is a valid stipulation.
Such stipulation, however, will not hold in case of liability for gross negligence or bad faith.

Common carriers distinguished from other contracts

DISTINGUISHED FROM TOWAGE. In towage, one vessel is hired to bring another vessel to another
place. It is usually confined to vessels that have received no injury or damage.

- A contract of towage is NOT a contract for the carriage of goods

- Towage refers to a service rendered to a vessel by towing for the mere purpose of expediting her
voyage without reference to any circumstances of danger. The negligence of the obligor in the
performance of the obligation renders him liable for damages for the resulting loss suffered by the
obligee. Fault or negligence of the obligor consists in his failure to exercise due care and prudence in the
performance of the obligation as the nature of the obligation so demands.

Diligence required: The party that provides the service in a contract of towage is required to observe
the due diligence of a good father of the family.

 utmost diligence of a very cautious person, with due regard for all the circumstances.

ORDINARY DILIGENCE - ordinary care or that diligence which an average (a reasonably prudent) person
exercise over his own property

DISTINGUISHED FROM ARRASTRE. Arrastre, a Spanish word which refers to hauling of cargo,
comprehends the handling of cargo on the wharf or between the establishment of the consignee or
shipper and the ship's tackle. The responsibility of the arrastre operator lasts until the delivery of the
cargo to the consignee. The service is usually performed by longshoremen.

-It comprehends the handling of cargo on the wharf or between the establishment of the consignee or
the shipper and the ship's tackle. Its responsibility lasts until the delivery of the cargo to the consignee.

-Arraste service is a public utility, discharging functions which are heavily invested with public interest.

The arrastre operator is no different from that of a depositary or warehouseman. The functions of an
arrastre operator have nothing to do with the trade and business of navigation, nor to the use or
operation of vessels (AQUINO & HERNANDO, Transportation Law, supra at 41).

Diligence required: An arrastre operator should observe the same degree of diligence as that required
of a common carrier and a warehouseman. – EXTRAORDINARY DILIGENCE

DISTINGUISHED FROM STEVEDORING: - A stevedore is NOT a common carrier for it does not transport
goods or passengers; it is not akin to a warehouseman for it does not store goods for profit. The loading
and stowing of cargoes would not have a far-reaching public ramification as that of a common carrier
and a warehouseman; the public is adequately protected by our laws on contract and on quasi delict.

-Stevedoring refers to the handling of the cargo in the holds of the vessel or between the ship's tackle
and the holds of the vessel. The responsibility of the stevedore ends upon the loading and stowing of
the cargo in the vessel (Id.).

- Word originated from latin word of stipare meaning stuff

Diligence required: The diligence required of a stevedore is the diligence of a good father of a family

DISTINGUISHED FROM A TRAVEL AGENCY. Travel Agency - A travel agency is NOT a common carrier.
The object of contractual relation of a person who purchases a ticket through a travel agency is only the
agency's service of arranging and facilitating the booking, ticketing and accommodation in a package
tour

Diligence required: The contract between the travel agency is a contract of service and not a contract of
carriage. Thus, the diligence required of a travel agency is not extraordinary diligence but that of a good
father of a family under Article 1173 of the Civil Code.

Tramp services and Line services

Republic Act (RA) No. 9515 defines "Line service" as the operation of a common carrier which publicly
offers services without discrimination to any user, has regular ports of call/destination, fixed sailing
schedules and frequencies and published freight rates and attendant charges and usually carries
multiple consignments." Liners carry "general cargoes," meaning whatever is offered is accepted for
shipment."

On the other hand, RA No. 9515 defines "Tramp service" as the operation of a contract carrier which has
no regular and fixed routes and schedules but accepts cargo wherever and whenever the shipper
desires, is hired on a contractual basis, or chartered by any one or few shippers under mutually agreed
terms and usually carries bulk or break-bulk cargoes. Tramps "offer their capacity for the carriage of bulk
cargoes as desired by the shipper, who ordinarily engages the whole of the ship; each voyage is thus a
matter of special arrangement between the shipowner and shipper." The tramp seeks and usually gets a
full cargo loaded by a single shipper and such cargoes are most often in bulk or in standard packages and
typically consist of raw materials, fuels and unprocessed foods so vital to the world economy. Tramp
service may also be considered as common carrier depending on circumstances.

GOVERNING LAWS

Civil code: ARTICLE 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.

However, Article 1753 of the Civil Code is also explicit that with respect to cases involving loss,
destruction or deterioration of goods, the law of the country of destination shall apply. Thus, Philippine
Laws shall apply if the goods are to be transported from Japan to the Philippines. ARTICLE 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.

Summary rules on applicable laws

a) Coastwise Shipping.
(1) New Civil Code (Art. 1732-1766) primary law.
(2) Code of Commerce -governs suppletorily in absence of Civil Code provisions.
b) Carriage from Foreign Ports to Philippine Ports
(1) New Civil Code - primary law
(2) Code of Commerce - all matters not regulated by the Civil Code
(3) Carriage of Goods by sea act – suppletorily to the civil code
c) Carriage from Philippine Ports to Foreign
(1) The laws of the country to which the goods are to be transported. (Art. 1753, Civil Code)
d) Overland Transportation.
(1) Civil Code primary law.
(2) Code of Commerce
e) Air Transportation.
(1) Civil Code
(2) Code of Commerce
(3) For International Carriage Convention for the Unification of Certain Rules Relating to the
International Carriage by Air or "Warsaw Convention" with its amendments
Nature of business

Common carriers exercise a sort of public office, and have duties to perform in which the public is
interested." Common carriers are public utilities; they are enterprises that specially cater to the needs of
the public and conduce to their comfort and convenience. As such, common carriers are impressed with
public interest and concern." Consequently, common carriers are subject to regulation by the State.

Moreover, the business of common carriers impinges directly and intimately upon the safety, well
being and property of the members of the general community who happen to deal with such carrier.
The law imposes duties and liabilities upon common carriers for the safety and protection of those who
utilize their services." That is the reason why common carriers are required under the Civil Code to
exercise extraordinary diligence in the performance of their obligation to carry goods and/or
passengers.

REGISTERED OWNER RULE AND KABIT SYSTEM

In certain cases, it is not only the operator of the vehicle who may be held liable even if the cause of
actions is culpa contractual. Ordinarily, the person who can be sued for breach of contract is the
contracting party. However, in certain cases, by reason of public policy, the law allows victims of
accidents to sue those who, strictly speaking, are third parties. This obtains in the cases covered by the
registered owner rule.

Example case of Obligations not arising from crime committed

X is passenger and Y is the driving the bus Z company owns. Y is a reckless driver and along Baguio’s
zigzag lane, the bus fell off the cliff. X died. What are the actions the heirs of X can file?

1. Culpa Criminal – Against the driver. This is a criminal action only meant for the driver. Reckless
imprudence resulting to Homicide. Delic.
a. Proof of Evidence – Guilty beyond unreasonable doubt
2. Culpa Contractual – Against the company. This is a civil case only meant for the Z company.
Violation of Contract of Carriage.
a. Proof of evidence – Preponderance of evidence
3. Culpa Aquiliana – Negligence resulting to damages. Both parties.
a. Proof of evidence – Preponderance of evidence

Registered owner rule

The rule in this jurisdiction is that the person who is the registered owner of a vehicle is liable for any
damage caused by the negligent operation of the vehicle although the same was already sold or
conveyed to another person at the time of the accident. The registered owner is liable to the injured
party subject to his right of recourse against the transferee or the buyer.

Jurisprudence: A registered owner who has already sold or transferred a vehicle has the recourse to a
third-party complaint, in the same action brought against him to recover for the damage or injury done,
against the vendee or transferee of the vehicle. The inconvenience of the suit is no justification for
relieving him of liability; said inconvenience is the price he pays for failure to comply with the
registration that the law demands and requires.
The Revised Motor Vehicles Law (Act No. 3992, as amended) provides that no vehicle may be used or
operated upon any public highway unless the same is properly registered.

Purpose of registration: The main aim of motor vehicle registration is to identify the owner so that if
any accident happens, or that any damage or injury is caused by the vehicle on the public highways,
responsibility therefor can be fixed on a definite individual, the registered owner. Instances are
numerous where vehicles running on public highways caused accidents or injuries to pedestrians or
other vehicles without positive identification of the owner or drivers, or with very scant means of
identification. It is to forestall these circumstances, so inconvenient or prejudicial to the public, that the
motor vehicle registration is primarily ordained.

"One of the principal purposes of motor vehicles legislation is identification of the vehicle and of the
operator, in case of accident; and another is that the knowledge that means of detection are always
available may act as a deterrent from lax observance of the law and of the rules of conservative and safe
operation.

The registered owner is not liable if the vehicle was taken from his garage without his knowledge and
consent. To hold the registered owner liable would be absurd as it would be like holding liable the
owner of a stolen vehicle for an accident caused by the person who stole such vehicle."

The registered owner rule applies even if the registered owner leased the vehicle to another who is the
actual operator." The registered owner is directly liable. In order to be free from liability, the lessor-
owner should register the lease contract with the Land Transportation Office.

The registered owner rule applies in a financial lease. A financial lease is a "mode of extending credit
through a non cancellable lease contract under which the lessor purchases or acquires, at the instance
of the lessee, machinery, equipment, motor vehicles, appliances, business and office machines, and
other movable or immovable property in consideration of the periodic payment by the lessee of a fixed
amount of money sufficient to amortize at least seventy (70%) of the purchase price or acquisition cost,
including any incidental expenses and a margin of profit over an obligatory period of not less than two
(2) years during which the lessee has the right to hold and use the leased property, x x x but with no
obligation or option on his part to purchase the leased property from the owner-lessor at the end of the
lease contract.

If the registered owner is made liable despite the transfer of the vehicle, the transferee is liable to the
registered owner for the damages caused to the passenger." He has the right to be reimbursed by the
transferee. Hence, a third party complaint against the transferee may be appropriate in a case filed by
the injured passenger against the registered owner.

Kabit system

The "registered owner" rule is applicable whenever the persons involved are engaged in what is known
as the "kabit system." The "kabit system" is an arrangement whereby a person who has been granted a
certificate of public convenience allows other persons who own motor vehicles to operate them under
his license, sometimes for a fee or percentage of the earnings. Although the parties to such an
agreement are not outrightly penalized by law, the kabit system is invariably recognized as being
contrary to public policy and therefore void and inexistent under Art. 1409 of the Civil Code.
It would seem then that the thrust of the law in enjoining the kabit system is not so much as to penalize
the parties but to identify the person upon whom responsibility may be fixed in case of an accident with
the end view of protecting the riding public. The policy therefore loses its force if the public at large is
not deceived, much less involved.

Pari delicto rule

Under the pari delicto doctrine, the parties to a controversy are equally culpable or guilty, they shall
have no action against each other, and it shall leave the parties where it finds them.

Persons who are parties to the "kabit" system cannot invoke the same as against each other either to
enforce their illegal agreement or to invoke the same to escape liability. This is consistent with the time
honored maxim "ex pacto illicito non oritur action" [No action arises out of an illicit bargain]. "Having
entered into an illegal contract, neither can seek relief from the courts, and each must bear the
consequences of his acts."

Jurisprudence: the petitioner filed a case against the private respondent alleging that the latter
purchased from said petitioner a motorcycle with sidecar. The petitioner was constrained to file an
action for damages because the private respondent allegedly failed to pay the balance of the purchase
price. However, the Supreme Court sustained the dismissal of the case because the parties were in pari
delicto. Although the motorcycle was allegedly purchased from the petitioner, the same remained to be
registered in the name of the petitioner and was operated under the latter's franchise pursuant to what
is commonly known as "kabit system" without prior approval of the appropriate government agency
(which was then the Board of Transportation). The Court ruled that it will not aid either party to enforce
an illegal contract.

AIRCRAFTS AND VESSELS.

It is believed that the policy which prohibits the "kabit system" may also be applied to vessels and
aircrafts that are covered by certificates of public conveniencé and necessity. It is a basic rule that no
person can operate a common carrier without securing a certificate of public convenience and necessity.
Hence, persons who do not have such certificate cannot circumvent the law by using the certificate of
another. No permits or certificates can be transferred without the permission of the government agency
concerned.

A is liable to the heirs of the victim. Under the registered owner rule, the registered owner remains to
be liable to third persons without knowledge of the transfer. As to third persons, the registered owner
of a motor vehicle is its true owner regardless of any unregistered sale of the vehicle.

BOUNDARY SYSTEM

In land transportation where the boundary system may be implemented by the common carrier, the
carrier cannot escape liability by claiming that the driver is a lessee. The carrier cannot exempt himself
on the ground he is a lessor because to tolerate such position would not only abet flagrant violations of
the Public Service Law but also to place the riding public at the mercy of reckless and irresponsible
drivers-reckless because the measure of their earnings depends largely upon the number of trips they
make and, hence, the speed at which they drive; and irresponsible because most if not all of them are in
no position to pay the damages they might cause."
*** There is an er-ee relationship between the driver and the common carrier, he cannot escape
liability.