Transportation Law - Commercial Law Review Exam

A cargo ship of X Shipping, Co. ran aground off the coast of Cebu during a storm and lost all its cargo amounting to Php50 Million. The ship itself suffered damages estimated at Php80 Million. The cargo owners filed a suit against X Shipping but it invoked the doctrine of limited liability since its vessel suffered an Php80 Million damage, more than the collective value of all lost cargo. Is X Shipping correct?

• Yes, since under that doctrine, the value of the lost cargo and the damage to the ship can be set-off.

• No, since each cargo owner has a separate and individual claim for damages.

• Yes, since the extent of the ship’s damage was greater than that of the value of the lost cargo.

• No, since X Shipping neither incurred a total loss nor abandoned its ship.

C Company shipped 20,000 bags of soy beans through S/S Melon, owned and operated by X Shipping Lines, consigned to the Toyo Factory and insured by the Surety Insurance Co., against all risks. C Company hired the entire vessel, with the option to go north or south, loading, stowing and discharging at its risk and expense. The owner and shipper agreed on a stipulation exempting the owner from liability for the negligence of its agents. When the cargo was delivered to the consignee, there were shortages amounting to P100,000.00. The insurance company paid for the damage and sought reimbursement from X Shipping Lines as carrier. Is the carrier liable? The carrier is:

• Liable, because the stipulation exempting its owner from liability for the negligence of its agent is against public policy, hence, void.

• Liable, because in case of loss, destruction or deterioration of goods, common carriers are presumed at fault under Article 1735 of the Civil Code.

• Not liable, because it exercised due diligence in stowing the goods.

• Not liable, because it is not a common carrier and the parties to a contract, as such, may enter into a stipulation exempting the owner from liability for the negligence of its agents.

Mark Anthony imported three crates of bus spare parts from Japan. The crates were shipped by the supplier from Japan to Manila on board a vessel owned by Verdon Shipping Lines. Upon arrival in Manila, it was discovered that one of the crates costing P1,500,000.00 was missing. The carrier offered to pay only P100,000.00, the maximum amount stipulated under Clause 18 of the covering Bill of Lading which limits the liability of the carrier. Mark Anthony claimed that he was not bound by such clause since he was not a signatory to the Bill of Lading. (a) Was the limited liability clause in the Bill of Lading binding on the consignee? (5 pts) (b) Was the stipulation in the Bill of Lading limiting the common carrier’s liability binding considering that it was a contract of adhesion? (5 pts)

Clarissa Marie was a passenger in a bus. The bus driver negligently bumped a car owned by Erika Joy, thereby causing damage to the car and injuries to Clarissa Marie. Clarissa Marie and Erika Joy filed separate actions for damages against the owner of the bus. The common carrier raised the defense that it exercised the diligence of a good father of the family in the selection and supervision of its drivers. Is such defense appropriate? (10 pts)

When is the “prior operator” or “protection of investment” rule not applicable? (10 pts)

M/V Martel collided with M/V Trevans due to the negligence of the captain of the former. M/V Martel sunk, resulting in the death of several passengers. The heirs of the passengers filed an action for damages against the ship owner on the ground that the latter was guilty of breach of contract of carriage. The ship owner, on the other hand, raised the defense that since the vessel sunk, he is no longer liable for damages. Is the defense tenable? (10 pts)