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1. Duty to exercise extraordinary diligence Article 1733 of the New Civil Code states that: “Common carriers, from the nature of their business and for reasons of public policy, are bound to observe extraordinary diligence in the vigilance over the goods and for the safety of the passengers transported by them, according to all the circumstances of each case.

Such extraordinary diligence in the vigilance over the goods is further expressed in Articles 1734, 1735, and 1745, Nos. 5, 6, and 7, while the extraordinary diligence for the safety of the passengers is further set forth in Articles 1755 and 1756.”

Reason: The nature of the business is imbued with public interest and public policy; because of the exigencies of the business. The public has no choice but to trust on the skills of the employees of the common carrier. The goods and the life of the passenger are placed in the hands of the common carrier.

Article 363 of the Code of Commerce provides that: “Outside of the cases mentioned in the second paragraph of Article 361, the carrier shall be obliged to deliver the goods shipped in the same condition in which, according to the bill of lading, they were found at the time they were received, without any damage or impairment, and failing to do so, to pay the value which those not delivered may have at the point and at the time at which their delivery should have been made. If those not delivered form part of the goods transported, the consignee may refuse to receive the latter, when he proves that he cannot make use of them independently of the others.”

Article 364 of the Code of Commerce provides that: “If the effect of the damage referred to in Article 361 is merely a diminution in the value of the gods, the obligation of the carrier shall be reduced to the payment of the amount which, in the

judgment of experts, constitutes such difference in value.”

Article 365 of the Code of Commerce provides that: “If, in consequence of the damage, the goods are rendered useless for sale and consumption for the purposes for which they are properly destined, the consignee shall not be bound to receive them, and he may have them in the hands of the carrier, demanding of the latter their value at the current price on that day. If among the damaged goods there should be some pieces in good condition and without any defect, the foregoing provision shall be applicable with respect to those damaged and the consignee shall receive those which are sound, this segregation to be made by distinct and separate pieces and without dividing a single object, unless the consignee proves that impossibility of conveniently making use of them in this form. The same rule shall be applied to merchandise in bales or packages, separating those parcels which appear sound.”

Presumption of negligence

Article 1735 of the New Civil Code provides that: “In all cases other than those mentioned in Nos. 1, 2, 3, 4, and 5 of the preceding article, if the goods are lost, destroyed or deteriorated, common carriers are presumed to have been at fault or to have acted negligently, unless they prove that they observed extraordinary diligence as required in Article 1733.”

2. Duration of liability

Article 1736 of the New Civil Code states that: “The extraordinary responsibility of the common carrier lasts from the time the goods are unconditionally placed in the possession of, and received by the carrier for transportation until the same are delivered, actually or constructively, by the carrier to the consignee, or to the person who has a right to receive them, without prejudice to the provisions of Article 1738.”

Article 1737 of the New Civil Code states that: “The common carrier's duty to observe extraordinary diligence over the goods remains in full

force and effect even when they are temporarily unloaded or stored in transit, unless the shipper or owner has made use of the right of stoppage in transitu.”

Article 1738 of the New Civil Code provides that: “The extraordinary liability of the common carrier continues to be operative even during the time the goods are stored in a warehouse of the carrier at the place of destination, until the consignee has been advised of the arrival of the goods and has had reasonable opportunity thereafter to remove them or otherwise dispose of them.”

3. Defenses of common carriers Article 1734 of the New Civil Code provides that: “Common carriers are responsible for the loss, destruction, or deterioration of the goods, unless the same is due to any of the following causes only:

(1) Flood, storm, earthquake, lightning, or other natural disaster or calamity;

(2) Act of the public enemy in war, whether international or civil;

(3) Act of omission of the shipper or owner of the goods;

(4) The character of the goods or defects in the packing or in the containers;

(5) Order or act of competent public authority.”

*The enumeration is exclusive or a closed list.

General Rule: Common carriers are responsible for the loss, destruction or deterioration of the goods.

Exceptions:

1. Flood, storm, earthquake, lightning or other natural disaster or calamity;

2. Act of the public enemy in war whether international or civil;

3. Act of omission of the shipper or owner of the goods;

4. The character of the goods or defects in the packaging or in the containers; and

5. Order or act of the competent public authority

Article 1740 of the New Civil Code states that: “If the common carrier negligently incurs in delay in transporting the goods, a natural disaster shall not free such carrier from responsibility.”

a. Fortuitous event

Article 1739 of the New Civil Code provides that: “In order that the common carrier may be exempted from responsibility, the natural disaster must have been the proximate and only cause of the loss. However, the common carrier must exercise due diligence to prevent or minimize loss before, during and after the occurrence of flood, storm or other natural disaster in order that the common carrier may be exempted from liability for the loss, destruction, or deterioration of the goods. The same duty is incumbent upon the common carrier in case of an act of the public enemy referred to in Article 1734, No. 2.”

*Fire is not within the ambit of natural disaster or calamity.

*Calamity includes thunderstorm.

*mechanical defect is not within the ambit of the natural disaster; it is within the control of the common carrier.

Requisites:

1. Proximate cause is the natural calamity

2. Absence of negligence on the part of the common carrier 3. The common carrier must

exercise due diligence to prevent loss before, during and after the occurrence of the disaster

4. Free from unreasonable delay by the common carrier or unreasonable deviation

b. Public enemy

Article 1739 of the New Civil Code states that: “In order that the common carrier may be exempted from responsibility, the natural disaster must have been the proximate and only cause of the loss. However, the common carrier must exercise due diligence to prevent or minimize loss before, during and after the occurrence of flood, storm or other natural disaster in order that the common carrier may be exempted from liability for the loss, destruction, or deterioration of the goods. The same duty is incumbent upon the common carrier in case of an act of

the public enemy referred to in Article 1734, No. 2.”

*Public enemy includes pirates however it does not include robbery and thief.

*Pirates are enemies of all civilized nation.

General Rule: rebels and insurreccion is not included.

Exception: If it they are cast of and took allegiance a hostile manner territory

*Existence of actual war is imperative.

c. Act of omission on the part of the shipper or owner of the goods

*There must be no fault or contributory negligence on the part of the carrier.

*In Compania Maritima v CA, the SC held that the common carrier is also at fault; the common carrier should have exercise extraordinary diligence by not relying solely on the statement of the shipper; it should have conducted its own weighing. In this case the common carrier is not totally absolved from its liability.

d. Improper packing

Article 1742 of the New Civil Code states that: “Even if the loss, destruction, or deterioration of the goods should be caused by the character of the goods, or the faulty nature of the packing or of the containers, the common carrier must exercise due diligence to forestall or lessen the loss.”

*If the defect is apparent, the carrier may refuse to accept the goods for carriage; if the shipper insists, the remedy is to make a protestation; make a foul bill of lading.

*In Iron Bulk v CA (Dec. 8, 2003), carrier issued pro forma bill of lading stated where in that it accepted goods in good condition.

The goods arrived defective. The SC held that the carrier is not exempt from liability because it accepted the goods without protestation.

*Foul Bill of Lading preserves the right of the carrier to use the excuse provided in 1734.

e. Order of public authority

Article 1743 of the New Civil Code states that: “If through the order of public authority the goods are seized or destroyed, the common carrier is not responsible, provided said public authority had power to issue the order.”

*The important requisite is that the public authority has the power to issue an order.

Case: Ganzon v CA

4. Contributory negligence of the shipper

Article 1741 of the New Civil Code states that: “If the shipper or owner merely contributed to the loss, destruction or deterioration of the goods, the proximate cause thereof being the negligence of the common carrier, the latter shall be liable in damages, which however, shall be equitably reduced.”

5. Stipulation limiting liability of carrier

Article 1744 of the New Civil Code states that: “A stipulation between the common carrier and the shipper or owner limiting the liability of the former for the loss, destruction, or deterioration of the goods to a degree less than extraordinary diligence shall be valid, provided it be:

(1) In writing, signed by the shipper or owner;

(2) Supported by a valuable consideration other than the service rendered by the common carrier; and (3) Reasonable, just and not contrary to public policy.”

*This is for the benefit of the carrier.

Consideration: Reduction of fare

*The stipulation must be in writing for the purpose of preventing abuse from the carrier.

Article 1748 of the New Civil Code provides that: “An agreement limiting the common carrier's liability for delay on account of strikes or riots is valid.”

Article 1749 of the New Civil Code states that: “A stipulation that the common carrier's liability is limited to the value of the goods appearing in the bill of lading, unless the shipper or owner declares a greater value, is binding.”

Article 1750 of the New Civil Code provides that: “A contract fixing the

sum that may be recovered by the owner or shipper for the loss, destruction, or deterioration of the goods is valid, if it is reasonable and just under the circumstances, and has been fairly and freely agreed upon.”

a. Requisites

Article 1744 of the New Civil Code states that: “A stipulation between the common carrier and the shipper or owner limiting the liability of the former for the loss, destruction, or deterioration of the goods to a degree less than extraordinary diligence shall be valid, provided it be:

(1) In writing, signed by the shipper or owner;

(2) Supported by a valuable consideration other than the service rendered by the common carrier; and

(3) Reasonable, just and not contrary to public policy.”

Article 1751 of the New Civil Code provides that: “The fact that the common carrier has no competitor along the line or route, or a part thereof, to which the contract refers shall be taken into consideration on the question of whether or not a stipulation limiting the common carrier's liability is reasonable, just and in consonance with public policy.”

*Liability can be limited but cannot be totally exempted.

*Stipulations reducing diligence or limiting liability must be in writing to be enforceable.

b. Invalid stipulations

Article 1745 of the New Civil Code states that: “Any of the following or similar stipulations shall be considered unreasonable, unjust and contrary to public policy:

(1) That the goods are transported at the risk of the owner or shipper;

(2) That the common carrier will not be liable for any loss, destruction, or deterioration of the goods;

(3) That the common carrier need not observe any diligence in the custody of the goods;

(4) That the common carrier shall exercise a degree of diligence less than that of a good father of a

family, or of a man of ordinary prudence in the vigilance over the movables transported; (5) That the common carrier shall not be responsible for the acts or omission of his or its employees;

(6) That the common carrier's liability for acts committed by thieves, or of robbers who do not act with grave or irresistible threat, violence or force, is dispensed with or diminished;

(7) That the common carrier is not responsible for the loss, destruction, or deterioration of goods on account of the defective condition of the car, vehicle, ship, airplane or other equipment used in the contract of carriage.”

*Even if they agreed with regard to numbers 1,2 and 3, the stipulation is void because it is contrary to public policy because all these stipulations exempt the carrier from liability.

General Rule: The degree of diligence may be lowered

Exception: Not lower than that of a good father of a family.

General Rule: stipulations exempting from liability acts committed by robbers and thieves who do not act with grave threat or irresistible threats are not valid.

Exception: In case the robbers or thieves used grave threat or irresistible threats.

*In this case, the presumption of negligence is still applicable, the stipulation only affects the outcome of the case.

c. Effect of delay

Article 1747 of the New Civil Code states that: “If the common carrier, without just cause, delays the transportation of the goods or changes the stipulated or usual route, the contract limiting the common carrier's liability cannot be availed of in case of the loss, destruction, or deterioration of the goods.”

*Delay will prevent the carrier from raising natural disaster as a defense and that the agreement limiting its liability cannot be raised as a defense.

d. Rule on presumption of negligence despite stipulation Article 1752 of the New Civil Code states that: “Even when there is an agreement limiting the liability of the common carrier in the vigilance over the goods, the common carrier is disputably presumed to have been negligent in case of their loss, destruction or deterioration.”