Law, Politics, and Philosophy

Tuguegarao City, Cagayan. Atty. MICHAEL JHON M. TAMAYAO manages this blog. Contact: mjmtamayao@yahoo.com.

Concept of General Average in Maritime Commerce

Topics

  1. Introduction
  2. Definition
  3. Requisites
  4. Expenses, by whom borne
  5. Examples

 

  1. Introduction

Long before the existence of maritime insurance, general average has been used as an ancient form of spreading risk in the sea transport.[1] General average is said to date from the Rhodian Law of approximately 800 B.C., which stipulated that if a ship was in danger and cargo was jettisoned to save the ship, then the ship and the remaining cargo were required to make a contribution to the owner of the lost cargo.[2] What remains of the Rhodian law is found in Roman law, which in turn was adopted in the Rôles of Oléron and all the subsequent sea codes until the present day.

General average is still a sui generis subject. It likewise relevant to contracts of carriage of goods by sea, and the damages resulting therefrom are insurable. Under Philippine law, the provisions on general averages are contained in the Code of Commerce.

 

  1. Definition

General averages refer to “all the damages and expenses which are deliberately caused in order to save the vessel, its cargo, or both at the same time, from a real and known risk.”[3]

The Code classifies averages into simple or particular and general or gross. In contrast to general averages, simple or particular averages refer to “all expenses and damages caused to the vessel or cargo which have not inured to the common benefit,”[4] which are, therefore, borne only by the owner of the property giving rise to same.[5] They are not for the common benefit, and are therefore not borne by the owners of the articles saved. The distinction is better appreciated by looking into the requisites of general average.

  1. Requisites

According to Tolentino, the following are the requisites for general average:[6]

First, there must be a common danger. This means, that both the ship and the cargo, after it has been loaded, are subject to the same danger, whether during the voyage, or in the port of loading or unloading; that the danger arises from the accidents of the sea, dispositions of the authority, or faults of men, provided that the circumstances producing the peril should be ascertained and imminent or may rationally be said to be certain and imminent. This last requirement excludes measures undertaken against a distant peril.

Second, that for the common safety part of the vessel or of the cargo or both is sacrificed deliberately. As a general rule, sacrifice is made through the jettison of the cargo or part of the ship is thrown overboard during the voyage. Exceptions are: (a) where the sinking of a vessel is necessary to extinguish a fire in a port, roadsteads, creek or bay; and (b) where cargo is transferred to lighten the ship on account of a storm to facilitate entry into a port.[7]

Third, that from the expenses or damages caused follows the successful saving of the vessel and cargo.

Fourth, that the expenses or damages should have been incurred or inflicted after taking proper legal steps and authority.[8] The procedure for recovery includes: (a) assembly and deliberation; (b) resolution of the captain; (c) entry of the resolution in the logbook; (d) detailed minutes; (e) delivery of the minutes to the maritime judicial authority of the first port, within 24 hours from arrival; and (f) ratification of the captain under oath.

  1. Expenses; by whom borne

Under the Code of Commerce, 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.[9] The insurers[10]  and the lenders on bottomry and respondentia shall likewise contribute.[11] Several interests are involved and their share of expense or damage shall be in proportion to the value of the owner’s property saved.

It must however be pointed out that a claimant (ship or cargo) is not entitled to obtain contribution from the other parties even if there is common danger when he or his employees are at fault, or negligent in law.

  1. Examples                                                                                                                                                                      

            A. Magsaysay Inc. v. Anastacio Agan, G.R. No. L-6393 (January 31, 1955)

Facts: The S S “San Antonio” vessel (plaintiff) with general cargo for different ship owners left Manila and was bound for Basco, Batanes, vis Aparri, Cagayan. It reached Aparri, had a stopover, and as it would proceed to Basco but still in port, it accidentally ran aground at the mouth of the Cagayan River. Plaintiff have it refloated by the Luzon Stevedoring Co.. The vessel returned to Manila to refuel and then proceeded to Basco, where the cargoes were delivered to their respective owners or consignees, who, with the exception of defendant, made a deposit or signed a bond to answer for their contribution to the average. Thus, the plaintiff brought an action to make defendant pay his contribution. Defendant denies liability. The lower court decided against the defendant, thus the appeal.

Issue: Whether the expenses incurred in floating a vessel so stranded should be considered general average and shared by the cargo owners.

Held: The expenses should not be considered as general average.

The said expenses do not fit into any of the specific cases of general average enumerated in article 811. No. 6 of this article does mention “expenses caused in order to float a vessel,” but it specifically refers to “a vessel intentionally stranded for the purpose of saving it.” In the present case, the stranding was not intentional.

The expenses also lack the requisites of general average. First, the expenses sought to be recovered from defendant were not incurred to save vessel and cargo from a common danger. The vessel ran aground in fine weather inside the port at the mouth of a river, a place described as “very shallow”. There was no imminent danger. It is, of course, conceivable that, if left indefinitely at the mercy of the elements, they would run the risk of being destroyed. But as stated at the above quotation, “this last requirement excludes measures undertaken against a distant peril.” What does appear from the testimony of plaintiff’s manager is that the vessel had to be salvaged in order to enable it “to proceed to its port of destination.” But as was said in the case just cited it is the safety of the property, and not of the voyage, which constitutes the true foundation of the general average. Second, the cargo could, without need of expensive salvage operation, have been unloaded by the owners if they had been required to do so. Third, the sacrifice was for the benefit of the vessel and not for the purpose of saving the cargo, the cargo owners are not in law bound to contribute to the expenses. And fourth, the procedure was not followed.

  1. Philippine Home Assurance Corp. v. CA and Eastern Shipping Lines, Inc.

Facts: Eastern Shipping Lines, Inc (ESLI) loaded on board SS Eastern Explorer in Kobe, Japan, shipment for carriage to Manila and Cebu, freight pre-paid and in good order and condition. While the vessel was off Okinawa, Japan, a small flame was detected on the acetylene cylinder located in the accommodation area near the engine room on the main deck. The acetylene cylinder exploded sending flame throughout the accommodation area, thus causing death and severe injuries to the crew and instantly setting fire to the whole superstructure of the vessel. The ship was abandoned by the master and the crew.

The vessel was towed by Fukuda Salvage Co. to the port of Naha, Japan. The fire was eventually extinguished at the said port and the cargoes which were saved were loaded to another vessel for delivery to their original ports of destination. ESLI charged the consignees several amounts corresponding to additional freight and salvage charges, which were paid by Philippine Home Assurance Corp (PHAC)under protest for and in behalf of the consignees. PHAC filed an action for recovery of sum paid. The trial court ruled in favor of ESLI which was affirm on appeal by the CA.

Issue: Whether or not the expenses incurred in saving the cargo are considered general average.

Held: There was no general average.

The goods subject of the controversy were neither lost nor damaged in transit by the fire that razed the carrier. Thus the issue is who among the carrier, consignee or insurer is liable for the additional charges or expenses incurred by the owner of the ship in the salvage operations and in the transshipment of the goods via a different carrier.

Moreover, fire is not considered a natural disaster or calamity since it almost always arises from some act of man or by human means. It cannot be an act of God unless caused by lightning.

General averages include all damages and expenses which are deliberately caused in order to save the vessel, its cargo, or both at the same time, from real and known risk. The formalities prescribed under the law were not complied with. ESLI must return to PHAC the amount paid under protest in behalf of the consignees.

[1] See Lowndes & Rudolf, The Law of General Average and the York-Antwerp Rules (D.J. Wilson & J.H.S. Cooke, eds), 12 Ed., Sweet & Maxwell Ltd., London, 1997.

[2]  See C. Abbott (Lord Tenterden), A Treatise of the Law relative to Merchant Ships and Seamen, 1 Ed., London, 1802, p. 273.

[3] Art. 811, Code of Commerce

[4] Art. 809, Code of Commerce

[5] Art. 810, Code of Commerce

[6] Tolentino, Commentaries on the Code of Commerce, Vol. 1, 7th ed., p. 155. Cited in the case, A. Magsaysay Inc. v. Anastacio Agan, G.R. No. L-6393 (January 31, 1955).

[7] See Arts. 816, 817, 818, Code of Commerce

[8] See Arts. 813-814, Code of Commerce.

[9] Art. 812, Code of Commerce

[10] See Art. 859, Code of Commerce

[11] See Art. 732, Code of Commerce

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

Information

This entry was posted on November 12, 2014 by in Maritime Commerce and tagged .

Navigation

Profile

tamayaocsu

tamayaocsu

Tuguegarao City, Cagayan Atty. MICHAEL JHON M. TAMAYAO manages this blog. He is currently starting his private law practice. Contact: mjmtamayao@yahoo.com; Tel. No. 09353343739. PROFILE: Atty. Tamayao is currently teaching law, philosophy and social sciences at the Cagayan State University. He finished his Bachelor of Arts in Philosophy degree at the Faculty of Philosophy, University of Santo Tomas and graduated in 2005, garnering the highest academic honors in that Academic Year. He pursued Licentiate in Philosophy and Master of Arts in Philosophy degrees at the same university, completing them both in 2007. In 2009, he took up Bachelor of Laws and Letter at the Cagayan State University, where he also teaches. He passed the 2013 bar exams, and now currently taking up Master of Laws and Letters at the San Beda Graduate School of Law.

View Full Profile →

Calendar

November 2014
M T W T F S S
« Sep    
 12
3456789
10111213141516
17181920212223
24252627282930
%d bloggers like this: