Short answer. Yes, within limits. A contract fixing the sum recoverable for the loss, destruction or deterioration of your goods is valid — but only if it is reasonable and just under the circumstances and was fairly and freely agreed upon. A token figure buried in a pre-printed ticket can fail both of those tests.
What the law says
is valid, if it is reasonable and just under the circumstances, and has been fairly and freely agreed upon
Civil Code, Article 1750 — Agreed Recovery Amount. Read the full provision →
A capped recovery is allowed
Article 1750 lets the carrier and the shipper agree in advance on the amount the carrier will pay if the goods are lost. Such a stipulation is valid, if it is reasonable and just under the circumstances, and has been fairly and freely agreed upon. There are therefore three requirements, and all must hold: the sum must be reasonable, it must be just given the particular shipment, and the agreement must have been reached fairly and freely. A ceiling on recovery is not against public policy in itself — the law simply refuses to enforce one that is unreasonable or that the shipper never truly consented to.
'Reasonable and just' measures the amount
The first two requirements look at the figure itself. A limit is reasonable and just when it bears a sensible relation to the value of what is being carried and to the freight the shipper paid. A sum so low that it bears no relation to the goods — a few pesos for a valuable consignment — is the classic example of a limit a court will not enforce, because it lets the carrier collect for carriage while promising almost nothing if it fails. The point is not that low limits are banned, but that the limit and the value of the shipment cannot be wildly out of proportion.
'Fairly and freely agreed' measures the consent
The third requirement looks at how the limit came to be in the contract. Contracts of carriage are usually contracts of adhesion — printed by the carrier, handed over on a take-it-or-leave-it basis — and a limit hidden in fine print that the shipper had no real chance to negotiate sits uneasily with the demand that it be fairly and freely agreed. What usually saves such a clause is a genuine choice: the shipper is offered the option to declare a higher value and pay a little more freight for fuller protection, and knowingly takes the cheaper, capped rate instead. A choice actually offered is the difference between a valid limit and one imposed.
Before you rely on the number
For a shipper, the safe course is to look at the declared-value box before signing, not after a loss. If the goods are worth more than the standard limit, declare the true value and pay the higher freight, and keep the copy that shows what you declared and agreed. For a carrier, a limit is only as good as the record that the shipper was told about it and had the chance to opt out. When a loss happens, the recoverable amount will turn on that piece of paper, so the time to get it right is at booking.
Cases citing this provision
These Supreme Court decisions cite the provision above. We list them so you can read them yourself; the summaries of what each decided are not ours to give.
- Everett Steamship Corporation vs. Court of Appeals, et al, G.R. No. 122494, October 8, 1998 — read the decision on LawPhil →
- Philippines Charter Insurance Corp. vs. Neptune Orient Lines/Overseas Agencies Services, Inc, G.R. No. 145044, June 12, 2008 — read the decision on LawPhil →
- Edgar Cokaliong Shipping Lines, Inc., vs. UCPB General Insurance Company, Inc, G.R. No. 146018, June 25, 2003 — read the decision on LawPhil →