The respondent was the consignee of 500 long tons of Philippine copra in bulk with a total value of USD 108,750 shipped from Cebu City on board the petitioner's vessel, the SS Eastern Planet, for discharge at Hamburg, Germany. The relevant bill of lading for the cargo provided as follows:

Except as otherwise stated herein and in the Charter Party, this contract shall be governed by the laws of the Flag of the Ship carrying the goods. In case of average, same shall be adjusted according to York-Antwerp Rules of 1950.

While the vessel was off Gibraltar, a fire broke out on board and caused water damage to the copra shipment in the amount of USD 591.38. The petitioner rejected the respondent's claim for compensation. The petitioner's defence was that, as the loss did not exceed 5% of respondent's interest in the cargo, it was not liable under Philippine law for the damage. The trial Court found in favour of the respondent. The petitioner appealed on a question of law.

Held: Appeal dismissed. Costs modified.

The petitioner argues that art 848 of the Code of Commerce, which bars claims for averages not exceeding 5% of the claimant's interest, should be applied rather than the York-Antwerp Rules, which provide for respondent's full recovery of the damage loss. Article 848 provides:

Claims for averages shall not be admitted if they do not exceed 5 per cent of the interest which the claimant may have in the vessel or in the cargo if it be gross average, and 1 per cent of the goods damaged if particular average, deducting in both cases the expenses of appraisal, unless there is an agreement to the contrary.

This Court finds no error and upholds the lower Court's ruling sustaining the respondent's damage claim, although the amount thereof did not exceed 5% of respondent's interest in the cargo. The lower Court correctly ruled that the bill of lading contains 'an agreement to the contrary', as it is expressly provides for the application of the York-Antwerp Rules 1950. The insertion of this condition is expressly authorised by Commonwealth Act No 65 which has adopted in toto the US Carriage of Goods by Sea Act (COGSA). Rule 3 of the relevant York-Antwerp Rules expressly states that '[d]amage done to a ship and cargo, or either of them, by water or otherwise, including damage by breaching or scuttling a burning ship, in extinguishing a fire on board the ship, shall be made good as general average'.

There is a clear and irreconcilable inconsistency between the York-Antwerp Rules, expressly adopted by the parties as their contract under the bill of lading which sustains the respondent's claim, and the Code provision, cited by the petitioner, which would bar the same. Furthermore, as correctly contended by the respondent, this case involves a contract of adhesion as embodied in the printed bill of lading issued by petitioner for the shipment to which the respondent as consignee merely adhered, having no choice in the matter, and consequently, any ambiguity therein must be construed against the petitioner as its author.