At charterer’s request
(Art 688)
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At shipowner’s request
(Art. 689)
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Fortuitous causes
(Art. 690)
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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;
5. Arrival at a port for repairs.
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1. If the extra lay days terminate without the cargo being placed alongside the vessel;
2. Sale by the owner of the vessel before loading by the charterer;
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1. War or interdiction of commerce;
2. Blockade;
3. Prohibition to receive cargo;
4. Embargo; and
5. Inability of the vessel to navigate.
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Terms:
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Primage - bonus to be paid to the captain after the successful voyage.
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Demurrage – the sum fixed in the 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.
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Deadfreight – 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.
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Lay Days - days allowed to charter parties for loading and unloading the cargo.
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Extra Lay Days – days which follow after the lay days have elapsed.
Usual forms of Consummating Contracts
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C.I.F. – cost, insurance and freight;
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F.O.B. - free on board;
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F.A.S. - free alongside ship; and
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C. & F. - cost and freight.
TranSshipment of Goods
The act of taking cargo out of one ship and loading it in another, or the transfer of goods from the vessel stipulated in the contract of affreightment to another vessel before the place of destination named in the contract has been reached, or the transfer for further transportation from one ship or conveyance to another.
It is not dependent on the ownership of the transporting ships or in the change of carriers, but rather on the fact of actual physical transfer of cargo from one vessel to another.
If done without legal excuse, however competent and safe the vessel into which the transfer is made, is a violation of contract and infringement of right of shipper and subjects carrier to liability if freight is lost event by cause otherwise excepted. (Magellan Manufacturing vs. CA, 201 SCRA 102)
Loan oN Bottomry AND RESPONDENTIA
A real, unilateral, aleatory contract, by virtue of which one person lends to another a certain amount of money or goods on things exposed to maritime risks, which amount, with its earnings, is to be returned if the things are safely transported, and which is lost if the latter are lost.
LOAN ON BOTTOMRY
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LOAN ON RESPONDENTIA
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Definition
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Loan made by shipowner or ship agent guaranteed by vessel itself and repayable upon arrival of vessel at destination. (Art. 719)
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Loan taken on security of the cargo laden on a vessel, and repayable upon safe arrival of cargo at destination. (Art. 719)
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Who may contract
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Shipowner or ship agent. Outside of the residence of the owners - the captain.
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Only the owner of the cargo.
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Common elements:
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Exposure of security to marine peril;
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Obligation of the debtor conditioned only upon safe arrival of the security at the point of destination.
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Forms:
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Public instrument
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Policy signed by the contracting parties and the broker taking part therein
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Private instrument (Art. 720)
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Contents:
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Kind, name and registry of the vessel;
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Name, surname and domicile of the captain;
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Names, surnames and domiciles of the borrower and the lender;
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Amount of the loan and the premium stipulated;
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Time for repayment;
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Goods pledged to secure repayment;
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Voyage during which the risk is run (Art.721)
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BOTTOMRY/ RESPONDENTIA
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ORDINARY LOAN (MUTUUM)
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Not subject to Usury Law
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Subject to Usury Law
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Liability of the borrower is contingent on the safe arrival of the vessel or cargo at destination
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Not subject to any contingency (absolute liability)
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The last lender is a preferred creditor
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The first lender is a preferred creditor
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WHEN LOAN ON BOTTOMRY OR RESPONDENTIA REGARDED AS SIMPLE LOAN
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Lender loaned an amount larger than the value of the object due to fraudulent means employed by the borrower. (ART.726)
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Full amount of the loan is not used for the cargo or given on the goods if all of them could not have been loaded, the balance will be considered a simple loan. (ART.727)
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If the effects on which the money is taken is not subjected to any risk. (ART.729)
Note: Under existing laws, the parties to a loan, whether ordinary or maritime, may agree on any rate of interest. (CB Circular 905)
MARINE INSURANCE
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LOAN ON BOTTOMRY OR RESPONDENTIA
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Indemnity is paid after the loss has occurred
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Indemnity is paid in advance by way of a loan
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In case of loss of the vessel due to a risk insured against, the obligation of the insurer becomes absolute
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In case of loss of the vessel due to a marine peril, the obligation of the borrower to pay is extinguished
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Consensual contract
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Real contract
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Hypothecary Nature of Bottomry/ Respondentia
GENERAL RULE: The obligation of the borrower to pay the loan is extinguished if the goods given as security are absolutely lost by reason of an accident of the sea, during the voyage designated, and if it is proven that the goods were on board.
EXCEPTIONS:
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Loss due to inherent defect;
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Loss due to the barratry on the part of the captain;
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Loss due to the fault or malice of the borrower;
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The vessel was engaged in contraband; and
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The cargo loaded on the vessel be different in from that agreed upon.
Concurrence of Marine Insurance and Loan on Bottomry/Respondentia
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The insurable interest of the owner of a ship hypothecated by bottomry is only the excess of the value over the amount secured by bottomry. (Sec. 101, Insurance Code)
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The value of what may be saved in case of shipwreck shall be divided between the lender and the insurer in proportion to the interest of each one. (Art. 735)
Note: If a vessel is hypothecated by bottomry only the excess is insurable, since a loan on bottomry partakes of the nature likewise of an insurance coverage to the extent of the loan accommodation. The same rule would apply to the hypothecation of the cargo by respondentia. (Pandect of Commercial Law and Jurisprudence, Justice Jose Vitug, 1997 ed.)
ACCIDENTS IN MARITIME COMMERCE
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Averages
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Arrival Under Stress
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Collision
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Shipwreck
AVERAGE
An extraordinary or accidental expense incurred during the voyage in order to preserve the cargo, 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. (Art. 806)
The person whose property has been saved must contribute to reimburse the damage caused or expense incurred if the situation constitutes general average.
Classes:
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Particular or Simple Average
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Gross or General Average
Where both vessel and cargo are saved, it is general average; where only the vessel or only the cargo is saved, it is particular average.
Expenses incurred to refloat a vessel, which accidentally ran aground, in order to continue its voyage, do not constitute general average. Not only is there absence of a marine peril, common safety factor, and deliberateness. It is the safety of the property, and not the voyage, which constitutes the true foundation of general average. (A. Magsaysay, Inc. vs. Agan, G.R.No. L-6393, Jan. 31, 1955)
PARTICULAR OR SIMPLE
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GROSS OR GENERAL
| Definition |
Damages or expenses caused to the vessel or cargo that did not inure to the common benefit, and borne by respective owners. (Art. 809)
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Damages or expenses deliberately caused in order to save the vessel, its cargo or both from real and known risk. (Art. 811)
| Requisites |
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common danger;
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deliberate sacrifice;
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success;
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proper formalities and legal steps.
| Liability |
The owner of the goods which gave rise to the expense or suffered the damage shall bear this average. (Art. 810)
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All the persons having an interest in the vessel and the cargo therein at the time of the occurrence of the average shall contribute to satisfy this average. (Art. 812)
The insurers (Art.859) and lenders on bottomry and respondentia shall likewise contribute. (Art.732).
| Number of interests involved |
Only one interest involved
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Several interests involved
| Share in the damage or expense |
100% share
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In proportion to the value of the owner’s property saved
| Right to recover |
No reimbursement
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There may be reimbursement
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Kinds (not exclusive)
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Art. 809
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Art. 811
| Procedure for recovery |
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Assembly and deliberation
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Resolution of the captain
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Entry of the resolution in the logbook
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Detailed minutes
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Delivery of the minutes to the maritime judicial authority of the first port, within 24 hours from arrival,
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Ratification by captain under oath. (Arts. 813-814)
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GOODS NOT COVERED BY GENERAL AVERAGE EVEN IF SACRIFICED
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Goods carried on deck. (ART.855)
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Goods not recorded in the books or records of the vessel. (ART.855 (2))
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Fuel for the vessel if there is more than sufficient fuel for the voyage. (Rule IX, York-Antwerp Rule)
Jettison
Act of throwing cargo overboard in order to lighten the vessel.
Order of goods to be cast overboard:
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Those which are on the deck, preferring the heaviest one with the least utility and value;
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Those which are below the upper deck, beginning with the one with greatest weight and smallest value. (Art. 815)
Jettisoned goods are not res nullius nor deemed “abandoned” within the meaning of civil law so as to be the object of occupation by salvage. (Pandect of Commercial Law and Jurisprudence, Justice Jose Vitug, 1997 ed.)
In order that the jettisoned goods may be included in the gross or general average, the existence of the cargo on board should be proven by means of the bill of lading. (Art. 816)
York-Antwerp (Y-A) Rules on Determining Liability for Averages With Regard To Deck Cargo
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Deck cargo is allowed only in domestic/coastwise/inter-island shipping, and is prohibited in international/overseas/foreign shipping.
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If deck cargo is loaded with the consent of the shipper on overseas trade, it must always contribute to general average, but should the same be jettisoned, it would not be entitled to reimbursement because there is violation of the Y-A Rules.
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If deck cargo is loaded with the consent of the shipper on coastwise shipping, it must always contribute to general average and if jettisoned would be entitled to reimbursement.
Reason: In domestic shipping, voyages are usually short and the seas are generally not rough. In overseas shipping, the vessel is exposed for many days to perils of the sea.
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DOMESTIC
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INTERNATIONAL
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Deck cargo is allowed
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Deck cargo is not allowed
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With shipper’s consent
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General average
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Particular average
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Without shipper’s consent
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Captain is liable
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Captain is liable
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ARRIVAL UNDER STRESS (ARRIBADA)
The arrival of a vessel at the nearest and most convenient port instead of the port of destination, if during the voyage the vessel cannot continue the trip to the port of destination.
When lawful
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When unlawful
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Who bears expenses:
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The inability to continue voyage is due to lack of provisions, well-founded fear of seizure, privateers, pirates, or accidents of the sea disabling it to navigate. (Art. 819)
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Lack of provisions due to negligence to carry according to usage and customs;
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Risk of enemy not well known or manifest
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Defect of vessel due to improper repair; and
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Malice, negligence, lack of foresight or skill of captain. (Art. 820)
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The shipowner or ship agent is liable in case of unlawful arrival under stress. But they shall not be liable for the damages caused by reason of a lawful arrival. (Art. 821)
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It is the duty of the captain to continue the voyage without delay after the cause of the arrival under stress has ceased failing in such duty renders him liable. However, in case the cause has been risk of enemies, there must first be an assembly before departure. (Art. 825)
Steps:
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Captain should determine during the voyage if there is well founded fear of seizure, privateers and other valid grounds;
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Captain shall assemble the officers and summon the persons interested in the cargo who may attend the meeting but without a right to vote;
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The officers shall determine and agree if there is well-founded reason after examining the circumstances. The captain shall have the deciding vote;
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The agreement shall be drafted and the proper minutes shall be signed and entered in the log book;
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Objections and protests shall likewise be entered in the minutes.
COLLISION
Impact of two vessels both of which are moving.
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