2010 Mercantile Law, Q12

AA entered into a contract with BB for the latter to transport ladies wear from Manila to France with transhipment via Taiwan. Somehow the goods were not loaded in Taiwan on time, hence, these arrived in France “off-season.” AA was only paid for onehalf (1/2) the value by the buyer.
AA claimed damages from BB. BB invoked prescription as a defense under the Carriage of Goods by Sea Act. Considering the “loss of value” of the ladies wear as claimed by AA, is BB’s defense tenable? Explain. (3%)

Quick check

Under Section 3(6) of COGSA, when does the one-year prescriptive period apply to claims against a sea carrier?

Does a claim for damages caused by delayed transshipment resulting in off-season arrival fall under COGSA's one-year prescription?

What prescriptive period applies to a shipper's action for damages arising from delay in a written contract of sea carriage?

What landmark Supreme Court decision established that COGSA's one-year prescription does not apply to delay in delivery?

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Which law governs international sea carriage of goods to and from Philippine ports in a suppletory character?

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1. COGSA Prescriptive Scope
Under Section 3(6) of the Carriage of Goods by Sea Act (Commonwealth Act Number 65), the short one-year prescriptive period within which to file a judicial action applies exclusively to cases involving physical loss or physical damage to the goods carried. In Mitsui O.S.K. Lines Ltd. v. Court of Appeals, the Supreme Court clarified that loss or damage contemplates physical deterioration, destruction, or disappearance of cargo, and does not encompass financial loss resulting from delay or market devaluation.

2. Delay versus Loss
Under Philippine maritime and transportation law, a distinction exists between physical loss or damage to cargo and economic loss arising from late delivery. When goods arrive late at the destination intact without physical impairment, the cargo is not lost or damaged under COGSA. Deterioration in commercial market value or loss of profit due to arriving off-season constitutes a breach of contract driven by delay rather than cargo destruction, removing the claim from COGSA's one-year statute of limitations.

3. Civil Code Prescription
Under Article 1144 of the Civil Code of the Philippines, actions upon a written contract prescribe in ten years. When an international carrier breaches a written contract of carriage by failing to transport goods within a reasonable time or causing off-season arrival due to delayed transshipment, the shipper's action for damages is governed by the ten-year prescriptive period under the Civil Code rather than the one-year period under COGSA.

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