Ready-made contract

This is another case involving a contract of adhesion or a contract in ready made form where one party prepares the stipulation while the other party merely affixes his signature or his "adhesion" thereto giving no room for negotiation and depriving the latter of the opportunity to bargain on equal footing. Can the party who adheres to or accept this kind of contract without objection, later on reject it on the ground of ignorance of its contents since the letters are so small that they are hard to read? This is the question in this case of a shipping company (ASC).

On or about June 5,1989, ASC’s vessel took and received on board, a shipment of 32,000 woven bags of various fertilizer in good order and condition in Toledo City, Cebu for transport to Cagayan de Oro. The subject shipment was consigned to A Fertilizer Company (AFC) and covered by a Bill of Lading and a Marine Insurance Policy issued by PIC. Paragraph 7 of the Bill of Lading provides that in case of losses and damages due to the mishandling of the cargo, the consignee (AFC) should file the claim for damages within twenty four hours from the time of delivery.

Upon its arrival at General Santos City, the vessel was instructed by AFC representative to proceed to Davao City and deliver the shipment to its Davao Branch. On June 10, 1989, the vessel arrived in Davao City where the shipment was unloaded. In the process of unloading, three bags of fertilize fell overboard and 281 bags suffered spillages which could no longer be recovered. Although there were no exterior sign of damage to the goods, it was determined that the consignee incurred actual damages for mishandling of the cargo in the amount of P68,196.16.

ASC did not pay the damages because the claim was not filed within the period stipulated in the Bill of Lading. So AFC asked for indemnity from the insurer PIC. After indemnifying AFC, PIC sued ASC on June 3, 1991 as subrogee of AFC. The carrier ASC however moved to dismiss the complaint on the ground that the claim or demand by PIC has been waived or abandoned or otherwise extinguished for failure of AFC, the consignee , to file the required claim for damages within 24 hours as stipulated in the Bill of Lading.

PIC opposed this motion. It argued that it had nothing to do with the preparation of the bill of lading. Worse, according to PIC, the bill of lading particularly stipulation number 7 was printed in very small letters that no one would be minded to closely examine the contents thereof and understand its legal implications.

Was PIC correct?

No.

A bill of lading is in the nature of a contract of adhesion. It defines the rights and liabilities of the parties in reference to the contract of carriage. These types of contracts have been declared as binding as ordinary contracts, the reason being that the party who is called to adhere to the contract is free to reject it entirely. Stipulations therein are valid and binding in the absence of any showing that the same are contrary to law, morals, customs, public order, or public policy. A shipper or consignee who receives a bill of lading without objection after an opportunity to inspect it, and permits a carrier to act on it by proceeding with the shipment is presumed to have accepted it as correctly stating the contract and to have assented to its terms. Acceptance of the bill of lading without dissent raises the presumption that all the terms therein were brought to the knowledge of the shipper and agreed to by him, and in the absence of fraud or mistake, he is estopped from thereafter denying that he assented to such terms.

In this case, after the consignee AFC received the bill of lading without any objection, it was presumed to have knowledge of its contents and to have assented to the terms and conditions set forth therein. So its failure to make prompt notice of claim as required is fatal to the right of PIC to claim indemnification for damages (Provident Insurance Corp. vs. Court of Appeals et. al., G.R. 118030, January 15, 2004).

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