Oral
Charter Party
SOMETIME in June 1978, Marvel Development Co.
(MDC) entered into a written barging and towage
contract with Mr. Gabby Yu (GY) for the shipment
of the former's cargo from Iligan City to Kalibo,
Aklan.
Under the said contract, MDC was allowed four
lay days and it agreed to pay demurrage at the
rate of P5,000 for every day of delay.
After the MV "Tanda" had passed the
Mactan-Mandaue Bridge, fire ensued in her engine
room, destroying the vessel and her cargoes.
Subsequently, GY sent a barge and a tugboat to
Iligan City and the loading of cargoes began immediately.
But upon completion of the loading, the parties
agreed to divert the barge to Roxas City for a
cargo consigned to Modern Hardware in that city.
This new agreement was not reduced to writing.
The cargo for Modern Hardware was eventually
unloaded and received by the consignee in Roxas
City.
Six months later, GY demanded payment of demurrage
charges in the amount of P40,000 for an alleged
delay of eight days and four hours. MDC ignored
the demand of GY. And the latter filed a suit.
After trial on the merits, the trial court ordered
MDC to pay GY the demurrage charges with interest,
attorney's fees and cost.
The Court of Appeals held that since the diversion
of the cargo to Roxas City was not covered by
a new written agreement, the original agreement
must prevail.
In the Supreme Court, MDC contended that the
first written contract was replaced by a new verbal
agreement that did not contain any stipulation
for demurrage.
But the Supreme Court ruled as follows:
"In ruling that in the absence of a new written
agreement, the old agreement must prevail, the
courts a quo were saying that the first agreement
continued to be valid because the second was void.
That is hardly a logical conclusion.
The contract executed by MDC and
GY was a contract of affreightment. As defined,
a contract of affreightment is a contract with
the shipowner to hire his ship or part of it,
for the carriage of goods, and generally takes
the form either of a charter party or a bill of
lading.
Article 652 of the Code of Commerce
provides that "a charter party must be drawn in
duplicate and signed by the contracting parties"
and enumerates the conditions and information
to be embodied in the contract, including "the
lay days and extra lay days to be allowed and
the demurrage to be paid for each of them".
But while the rule clearly shows that this kind
of contract must be in writing, the succeeding
Article 653 just as clearly provides:
"If the cargo should be received without a charter
party having been signed, the contract shall be
understood as executed in accordance with what
appears in the bill of lading, the sole evidence
of title with regard to the cargo for determining
the rights and obligations of the ship agent,
of the captain and of the charterer.
We read this last provision as meaning that the
charter party may be oral, in which case the terms
thereof, not having been reduced to writing, shall
be embodied in the bill of lading.
Let us bear in mind that a charter party may be
oral and the rights and obligations of the parties
shall be governed by provisions of the bill of
lading.
As the year 2004 is about to end,
let us thank the Almighty for all the blessings
we have received. And pray that the ensuing year
be more blessed. Happy holidays to everyone!
For questions or comments, contact
the writer at jtb@pac-atlantic.com.
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Is the Bank Liable for
Signing Shipper's Letter of Indemnity?
Sometime in December 1991, Mr. Nestor Anel delivered
to Long Shipping Lines a cargo to be transported
on board the MV "Tanda" on her voyage
from Cebu City for Surigao del Sur. The shipping
company issued bill of lading no. 10 where Mr.
Anel was both the shipper and consignee of the
cargo valued, on the face thereof, in the amount
of P6,500.00.
Mr. Anel subsequently insured the cargo covered
by bill of lading no. 10 with CB Insurance Co.,
Inc. for the amount of P100,000.00 "against
all risks" under an open policy.
After the MV "Tanda" had passed the
Mactan-Mandaue Bridge, fire ensued in her engine
room, destroying the vessel and her cargoes.
Shortly thereafter, Mr. Anel filed a claim with
CB Insurance Co., Inc. The latter approved his
claim and he signed a Subrogation Receipt after
receiving the amount of P100,000.00.
Three months later, he also filed a claim with
the shipping company. The shipping company paid
Mr. Anel the amount of P6,500.00 in full payment
of his claim without knowing that the same cargo
was insured with CB Insurance Co., Inc.
Then, as subrogee of Mr. Anel, CB Insurance Co.,
Inc. filed a complaint against Long Shipping Lines
with the Regional Trial Court of Makati for the
recovery of the amount of P100,000.00 which it
paid to Mr. Arnel.
But the trial court dismissed the case for lack
of merit.
However, the Court of Appeals reversed the decision
of the trial court and ordered Long Shipping Lines
to pay the amount of P100,000.00 to CB Insurance
Co., Inc.
In the Supreme Court, CB Insurance Co., Inc.
contested that the liability of the common carrier
should be based on the actual insured value of
the goods, subject of the case. On the other hand,
Long Shipping Lines claimed its liability should
be limited to the value declared by the shipper/consignee
in the bill of lading.
The Supreme Court ruled as follows:
"The records show that the bill of lading
covering the lost goods contain the stipulation
that in case of claim for loss or for damage to
the shipped merchandise or property, the liability
of the common carrier x x x shall not exceed the
value of the goods as appearing in the bill of
lading.
In the present case, the stipulation
limiting petitioner's (Long Shipping Lines) is
not contrary to public policy. In fact, its just
and reasonable character is evident. The shipper/consignee
may recover the full value of the goods by the
simple expedient of declaring the true value of
the shipment in the bill of lading. Other than
the payment of a higher freight, there was nothing
to stop the shipper from placing the actual value
of the goods therein.
A shipper/consignee that undervalues
the real worth of the goods it seeks to transport
does not only violate a valid contractual stipulation
but commits a fraudulent act when it seeks to
make the common carrier liable for more than the
amount it declared in the bill of lading.
It is well to point out that, for
assuming a higher risk (the alleged actual value
of the goods), the insurance company was paid
the correct higher premium by the shipper/consignee;
while petitioner was paid a fee lower than what
it was entitled to for transporting the goods
that had been deliberately undervalued by the
shipper in the bill of lading. Between the two
of them, the insurer should bear the loss in excess
of the value declared in the bill of lading. This
is the just and equitable solution. "
Let us bear in mind that the liability
of a common carrier is the "actual valuation
declared by the shipper/consignee in the bill
of lading" and not the "actual insured
value" of the goods.
For questions or comments, contact
the writer at jtb@pac-atlantic.com.
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Can the
Carrier Be Exempt from Liability Due to Fire?
No. And this is the story.
Sometime in 1993, Beauty Plants,
Inc. delivered some artificial trees to Share
Company , the General Ship Agent of Dutch Lines,
a foreign shipping corporation, for transportation
and delivery at the port of Riyadh, Saudi Arabia.
Poly Assurance Company insured
the cargo against all risks.
While the carrying vessel was in
transit, she and her cargo caught fire. The vessel
eventually sank.
Share Company informed Beauty Plants,
Inc. about the tragedy. Consequently, Poly Assurance
Company paid Beauty Plants, Inc. corresponding
to the amount of the insurance for the cargo.
Then, Poly Assurance Company sent
a demand letter to Share Company demanding the
reimbursement of what it paid to Beauty Plants,
Inc. on the basis of the Subrogation Receipt.
But Share Company denied any liability on the
ground that such liability was extinguished when
the vessel was gutted by fire.
Thus, Poly Assurance Company filed
with the Regional Trial Court a complaint for
damages against Share Company and Dutch Lines.
After trial on the merits, trial court rendered
a Decision in favor of Poly Assurance Company.
On appeal, the Court of Appeals
affirmed the trial court's decision. The Court
of Appeals denied the motion for reconsideration
of Share Company and Dutch Lines. And they elevated
the case to the Supreme Court.
The Supreme Court ruled in the
following manner:
"Fire is not one of those enumerated under
the above provision (Art. 1734, Civil Code) which
exempts a carrier from liability for loss or destruction
of the cargo.
In Eastern Shipping Lines, Inc.
vs. Intermediate Appellate Court, we ruled that
since the peril of fire is not comprehended within
the exceptions in Article 1734, then the common
carrier shall be presumed to have been at fault
or to have acted negligently, unless it proves
that it has observed the extraordinary diligence
required by law.
Even if fire were to be considered
a natural disaster within the purview of Article
1734, it is required under Article 1739 of the
same Code that the natural disaster must have
been the proximate and only cause of the loss,
and that the carrier has exercised due diligence
to prevent or minimize the loss before, during
or after the occurrence of the disaster."
Let us always remember that fire
will not exempt the carrier from liability for
loss or destruction of cargo. And in those cases
where the presumption of fault or negligence is
applied, the common carrier must prove that it
exercised extraordinary diligence in order to
overcome the presumption.
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For comments or inquiries, email
the writer at jtb@pac-atlantic.com.ph.
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Channel Archive : 2004 Q4
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