Commercial and Taxation Laws › Transportation Law › Common Carriers

1. Common Carrier vs. Private Carrier

Test to Determine if Common Carrier

Tests to Determine Whether the Entity is a Common Carrier

  • It must be engaged in the business of carrying goods for others as a public employment and must hold itself out as ready to engage in the transportation of goods generally as a business and not as a casual occupation;
  • It must undertake to carry goods of the kind that to which its business is confined;
  • A common carrier may transport passengers or goods by land, water, or air; established roads are not a prerequisite to common-carrier status;
  • The transportation must be for hire. (First Philippine Industrial Corporation v. CA)1

To determine if an entity is operating as a common carrier, the Supreme Court has established several criteria. The key test involves the following elements:

  • Public Service: The entity must be engaged in the transportation of passengers or goods as a public service. This means that the transportation service is offered to the public or a segment of the public for compensation.
  • Regularity: Regular or scheduled service is not required. The question is whether the entity holds itself out to the public as engaged in the business of transportation.
  • Compensation: The service must be provided for a fee, fare, or other compensation. A private carrier may also transport for hire under a particular agreement, or may transport gratuitously; the distinction is whether it holds itself out to the public as a carrier.
  • Offer to the Public: The service must be available to the public or to a broad segment of the public. This means that the entity holds itself out as being ready to serve the public or a substantial portion of the public.

In De Guzman v. Court of Appeals2, the Supreme Court emphasized that a common carrier is one who "holds itself out to the public as engaged in the business of transporting persons or property from place to place, for compensation, offering its services to the public generally."

The “true” test for a common carrier is not the quantity or extent of the business actually transacted, or the number and character of the conveyances used in the activity, but whether the undertaking is part of an activity engaged in by the carrier that he has held out to the general public as his business or occupation. (Sps. Pereña v. Sps. Zarate)3

Common Carrier v. Private Carriers

Doctrinal Pronouncements Related to the Determination of Common Carriers

  • The Civil Code4 does not distinguish between one whose principal activity is the carrying of goods and one who does such carrying of goods only as an ancillary activity. (A.f. Sanchez Brokerage Inc v. Court of Appeals and Fgu Insurance Corporation, G.R. No. 147079, 21 December 2004)5
  • The Civil Code does not distinguish between a person or enterprise offering transportation services on a regular or scheduled basis and one offering such service on an unscheduled basis. (De Guzman v. CA, 250 Phil. 613)6
  • The Civil Code does not distinguish between a carrier offering its services to the general population and one who offers its services only from a narrow segment of the general population (Id.)
  • A Certificate of Public Convenience is not a requisite to incur liability under the Civil Code provisions governing common carriers. (Id.)
  • The Civil Code makes no distinction as to the means of transportation as long as it is done through land, water, or air. (First Philippine Industrial Corporation v. CA, 360 Phil. 852)7.
  • A carrier will be considered a common carrier regardless of whether it owns the vehicle it used or has to actually hire one as long as the entity holds itself out to the public for transport of goods as a business. (Torres-Madrid Brokerage, Inc. v. Feb Mitsui Marine Insurance Co., Inc. and Benjamin P. Manalastas, G.R. No. 194121, 11 July 2016)8

Private carriers are persons or entities who undertake to transport goods or persons from one place or another by special agreement in a particular instance only, without making the activity a vocation or without holding himself out to the public as ready to act for all who may desire his/her/its services, either gratuitously or for hire. (Sps. Pereña v. Sps. Zarate, 693 Phil. 373)

Common Carriers v. Private Carriers

COMMON CARRIERS PRIVATE CARRIERS
Holds itself out as providing carriage to the public or a segment of the public Engage with particular individuals or groups only
Governed by the Civil Code provisions related to common carriers, the Public Service Act9, Code of Commerce10, and other special laws regarding transportation. Governed by the Civil Code provisions on obligations and contracts
Required to exercise extraordinary diligence Only required to exercise ordinary diligence
For goods entrusted to a common carrier, loss, destruction, or deterioration gives rise to the presumption of negligence under Civil Code Art. 1735, subject to Art. 1734. For passenger death or injury, the presumption applies under Art. 1756. For passenger baggage, Art. 1754 distinguishes baggage entrusted to the carrier from effects kept by the passenger; the latter are governed by Arts. 1998–2000. No presumption of fault or negligence is present for private carriers.

(Sps. Pereña v. Sps. Zarate, 693 Phil. 373)

Charter Parties

A Charter Party is a contract for the use of a vessel or its space. It may transfer possession and control to the charterer under a bareboat or demise charter, or provide for carriage by the shipowner under a contract of affreightment. (San Miguel Corporation v. Heirs of Inguito, G.R. No. 141716, 4 July 2002)12

A Charter Party may either be:

  • Bareboat or demise charters; or
  • Contracts of affreightment, which includes time charters and voyage charters. (San Miguel Corporation v. Heirs of Inguito)

a. Bareboat/demise charter

Under a Bareboat/Demise Charter, the charterer mans the vessel with his own people and becomes, in effect, the owner of the ship for the voyage or service stipulated, subject to the liability for damages caused by negligence. (San Miguel Corporation v. Heirs of Inguito)13

General Categories or Kinds of Charter Party

DEMISE / BAREBOAT CONTRACT OF AFFREIGHTMENT
Charterer is liable for
damages.

The charterer mans the vessel with its own people, and is considered the owner pro hac vice (for this occasion only).

Owner completely and exclusively relinquishing possession, command, and navigation to the charterer.		 The owner of a vessel leases the whole or part of its space to haul goods for another.

Owner retains possession, command, and navigation of the ship.
Charterer is liable for damages Shipowner is liable for damages
A bareboat charter does not automatically make the charterer a private carrier. Whether it is a common carrier depends on whether it holds itself out to the public to provide carriage under Civil Code, Art. 1732; apply the corresponding standard of diligence. Under a contract of affreightment, the shipowner retains possession and navigation. Whether the carriage is common or private depends on the carrier’s undertaking and the applicable charter arrangement under Civil Code, Art. 1732; a common carrier owes extraordinary diligence under Art. 1733.

b. Time charter

The leased vessel is leased to the charterer for a fixed period of time. (San Miguel Corporation v. Heirs of Inguito)14

c. Voyage/trip charter

The ship is leased for a single voyage. (San Miguel Corporation v. Heirs of Inguito)15

Authorities

  • A.f. Sanchez Brokerage Inc v. Court of Appeals, G.R. No. 147079, 21 December 2004
  • Civil Code
  • Code of Commerce
  • De Guzman v. CA, G.R. No. 250 Phil. 613
  • De Guzman v. Court of Appeals
  • First Philippine Industrial Corporation v. CA
  • First Philippine Industrial Corporation v. CA, G.R. No. 360 Phil. 852
  • Public Service Act
  • San Miguel Corporation v. Heirs of Inguito, G.R. No. 141716, 4 July 2002
  • Sps. Pereña v. Sps. Zarate
  • Sps. Pereña v. Sps. Zarate, G.R. No. 693 Phil. 373
  • Torres-Madrid Brokerage, Inc. v. Feb Mitsui Marine Insurance Co., Inc., G.R. No. 194121, 11 July 2016