Business–Customer Contracts Under Philippine Civil Law

Short answer: Every contract between a business and its customer is governed first by the Civil Code: it is perfected by consent, binds both sides with the force of law, and must be performed in good faith. When the customer is a consumer buying for personal or household use, the Consumer Act (RA 7394) adds warranty and liability rules that fine print cannot waive.

This guide walks through a business–customer contract stage by stage — which law applies, how the deal is formed, how far standard terms can go, what each side owes, and what remedies exist when something goes wrong. If you run a business and want a broader risk overview, see our checklist of civil law risks every Philippine business should watch for.

Which law governs a contract between a business and a customer?

Think of it as layers. The Civil Code is the base layer for every contract, whether the customer is a homeowner, a company or another shop. Article 1159 says obligations arising from contracts “have the force of law between the contracting parties and should be complied with in good faith,” and Article 1306 lets the parties set their own terms as long as these are not contrary to law, morals, good customs, public order or public policy.

The Consumer Act of the Philippines (RA 7394) sits on top when the customer is a “consumer.” The Act defines a consumer as a natural person who buys, leases or receives consumer products, services or credit (Art. 4[n]), and consumer products and services as those primarily for personal, family, household or agricultural purposes (Art. 4[q]). The Act also directs that the consumer’s best interest be considered in interpreting it (Art. 3).

For deals made online, two more laws come in. The E-Commerce Act (RA 8792) provides that no contract shall be denied validity or enforceability solely because it was made through electronic data messages or documents (Sec. 16). The Internet Transactions Act of 2023 (RA 11967) covers business-to-business and business-to-consumer internet transactions within the DTI’s mandate, but expressly excludes consumer-to-consumer transactions (Sec. 3).

Situation	Civil Code	Consumer Act (RA 7394)	Internet Transactions Act (RA 11967)
Walk-in customer buys a refrigerator for home use	Yes	Yes	No (not online)
Shopper buys a phone from an online store	Yes	Yes	Yes (B2C)
Homeowner hires a contractor to repair a roof	Yes	Yes (consumer services)	Only if transacted online
Company buys office equipment from a supplier	Yes	Generally no — buyer is not a natural person buying for personal use	Yes, if transacted online (B2B)
One individual sells a used bike to another online	Yes	Generally no — seller is not in business	No (C2C is excluded)

Which legal layers typically apply. Borderline cases depend on the facts.

When is a business–customer contract formed?

Most sales and service deals are perfected the moment the parties agree. Article 1315 provides that contracts are perfected by mere consent, and from that moment the parties are bound not only to what they expressly agreed but also to “all the consequences which, according to their nature, may be in keeping with good faith, usage and law.” That last phrase matters: warranties and other duties can bind a business even if nothing about them was written down.

The three essentials under Article 1318 are consent, a certain object and a cause (see what makes a contract valid). Consent is the meeting of an offer that is certain and an acceptance that is absolute; a “yes, but…” is only a counter-offer (Art. 1319). In practice, a customer’s order, a business’s written confirmation, an official receipt or a click on “Place order” can each be evidence of that meeting of minds.

Are standard terms and fine print binding on customers?

Generally, yes. Customers who accept a business’s standard form — terms and conditions, a booking form, an app’s user agreement — are bound by it, because a contract is the law between the parties. But the law puts firm limits on what fine print can do, and many of those limits exist precisely because the customer had no say in drafting the terms.

Common clause	How the law treats it	Legal basis
Ambiguous or confusing wording	Obscure words or stipulations are not interpreted in favor of the party who caused the obscurity — usually the business that drafted them	Civil Code Art. 1377
“We may change the price or cancel at any time, at our sole discretion”	Open to challenge: a contract’s validity or compliance cannot be left to the will of one party	Civil Code Art. 1308
Terms in a language the customer does not understand	If mistake or fraud is alleged, the party enforcing the contract must show the terms were fully explained	Civil Code Art. 1332
“We are not liable for any damage caused by our product or service”	Clauses preventing, exonerating or reducing liability for defective products or services are prohibited; waiving future fraud is void	RA 7394 Art. 106; Civil Code Art. 1171
“No warranty” on new consumer goods	For consumer products, stipulations contrary to the Consumer Act’s warranty article have no legal effect; a seller who knew of hidden defects cannot rely on a waiver	RA 7394 Art. 68(b)(6); Civil Code Art. 1566
Late-payment penalty or cancellation fee	Valid in principle, but courts may equitably reduce a penalty that is iniquitous or unconscionable, or where there was partial performance	Civil Code Art. 1229

Fine-print clauses and their legal limits.

The Consumer Act adds a sales-practice layer. A deceptive act — such as misrepresenting a product’s quality, grade, newness or warranty terms — violates the Act whether it happens before, during or after the transaction (Art. 50). So does an unfair or unconscionable practice that takes advantage of a consumer’s ignorance, illiteracy, lack of time or inability to understand the language of an agreement to push a deal that is grossly one-sided (Art. 52). For more on drafting penalties that hold up, see penalty clauses in Philippine contracts.

What does each side owe once the contract is made?

The business

Deliver what was promised. Anyone who, in performing an obligation, is guilty of fraud, negligence or delay, or who in any manner contravenes its tenor, is liable for damages (Art. 1170).
Honor express warranties. A seller’s statement of fact or promise about the item is an express warranty if it naturally tends to induce the purchase and the buyer relied on it; mere opinion or sales talk about value is not, unless given as an expert (Art. 1546).
Honor implied warranties. Unless a contrary intention appears, the seller warrants the right to sell and that the thing is free from hidden defects (Art. 1547). Goods bought by description from a dealer must be of merchantable quality, and goods bought for a purpose the seller knew about must be reasonably fit for it (Art. 1562).
Perform services properly. Work poorly done can be ordered undone and redone at the provider’s cost (Art. 1167). Under the Consumer Act, a service supplier is liable, independently of fault, for damage caused to consumers by defects in the service (RA 7394 Art. 99).

The customer

Pay the price on the agreed terms and comply in good faith (Art. 1159).
Online buyers must exercise ordinary diligence and generally cannot cancel a confirmed order that is already paid for, or perishable goods already with a delivery service or in transit, unless an exception applies — for example, the transaction allows cancellation for a fee or the parties agree otherwise (RA 11967 Sec. 19).

In reciprocal obligations, neither side is in delay if the other has not complied or is not ready to comply properly; once one side performs, the other’s delay begins (Art. 1169). Outside those situations, delay usually starts only after a judicial or extrajudicial demand.

What remedies does a customer have when something goes wrong?

Problem	Civil Code remedy	Extra consumer or online layer	Watch out for
Item has a hidden defect	Withdraw from the sale or ask for a proportionate price reduction, with damages in either case (Arts. 1561, 1567)	Breach of express warranty: consumer may choose repair or refund; warranty repairs generally due within 30 days (RA 7394 Art. 68[f]). Uncorrected imperfections: replacement, refund or price reduction (Art. 100)	Civil Code hidden-defect actions prescribe six months from delivery (Art. 1571)
Product causes injury or property damage	Damages for breach (Art. 1170)	Manufacturer, producer or importer liable independently of fault for defective products (Art. 97); seller liable in some cases, such as when the maker cannot be identified (Art. 98)	Keep the product, packaging and receipts as evidence
Service done badly	Have it redone at the provider’s cost, plus damages (Arts. 1167, 1170)	Service supplier liable for defective services (Art. 99)	Document the defect with photos and a written report
Non-delivery or serious breach	Choose fulfillment or resolution, with damages (Art. 1191)	Online consumers may pursue repair, replacement or refund under RA 7394 (RA 11967 Sec. 20)	Send a written demand first
Customer was misled into buying	Contract is voidable if consent was given through mistake, fraud or undue influence (Art. 1330)	Deceptive sales practice under RA 7394 Art. 50, enforced by the DTI	Keep ads, listings and chat messages

Customer remedies by problem type.

To claim under a warranty, the Consumer Act says the buyer only needs to present the warranty card or the official receipt, together with the product, to the immediate seller; no other documentary requirement may be demanded (RA 7394 Art. 68[b][4]). If you want to understand when a customer can walk away from a signed deal altogether, read can you cancel a contract after signing it.

What can a business do when a customer does not pay or perform?

The same Civil Code rules work in the business’s favor. A customer who fails to pay after demand is in delay and liable for damages (Arts. 1169, 1170). In reciprocal contracts, the business may choose between demanding fulfillment and resolving the contract, with damages in either case (Art. 1191) — see our full guide to breach of contract remedies. Agreed penalties can be collected, subject to the court’s power to reduce unconscionable ones (Art. 1229). The key practical step is a clear written demand; our guide explains when a demand letter is required before filing a case.

How do you resolve a business–customer contract dispute, step by step?

Collect the paper trail. Receipts, order confirmations, warranty cards, screenshots of the listing or ad, emails and chat messages. Electronic documents are admissible and cannot be rejected solely because they are electronic (RA 8792).
Identify the layers that apply using the first table above — Civil Code only, or Civil Code plus the Consumer Act and online-transaction rules.
Raise the issue with the seller or customer in writing. State the defect or breach, the remedy you want (repair, replacement, refund, payment) and a reasonable deadline.
Send a formal demand if the informal request fails. A demand generally puts the other side in delay and strengthens a later claim for damages and interest.
For consumer complaints, go to the DTI. The DTI enforces the Consumer Act’s rules on sales practices, warranties and product liability (RA 7394 Arts. 49, 66, 96). For online purchases, first use the platform’s or seller’s internal complaint process; under RA 11967 it is deemed exhausted if the complaint is still unresolved seven calendar days after filing (Sec. 24). RA 11967 also directed the DTI to set up an online dispute resolution platform (Sec. 17). Consumer complaints go to the DTI Fair Trade Enforcement Bureau (fteb@dti.gov.ph; (02) 7215 1165, weekdays 8:00 am–5:00 pm). Bring the receipt or warranty card, the product or photos of the defect, the listing or ad, your written demand and the seller’s reply, and a valid ID. For online purchases, a damages claim before the court or the DTI must be filed within two years from when the cause of action arose (RA 11967 Sec. 28).
Check whether barangay conciliation comes first. Disputes between individuals who live in the same city or municipality may need to go through the Katarungang Pambarangay before a court case.
Go to court if needed. Purely money claims may qualify for the small claims procedure in the first-level courts, now found in the Supreme Court’s Rules on Expedited Procedures in the First Level Courts (A.M. No. 08-8-7-SC, 2022). Whether your claim qualifies depends on the amount claimed against the ceiling set in those rules; the clerk of court of the Municipal or Metropolitan Trial Court where you or the other party lives can confirm it and give you the forms. Larger or non-money claims go through an ordinary civil action. Mind the deadlines: hidden-defect actions under the Civil Code prescribe six months from delivery (Art. 1571).

Your first step today: write down what you bought or sold, the date of delivery, what went wrong and the remedy you want, then send the other side a dated written demand and keep proof that it was received.

Key takeaways

The Civil Code governs every business–customer contract; the Consumer Act adds protection only when the customer is a consumer buying for personal, family, household or agricultural use.
Contracts are perfected by consent and carry implied duties of good faith, usage and law — including warranties that do not need to be written.
Standard terms bind customers, but ambiguous clauses are read against the drafter, and clauses waiving product or service liability or consumer warranty rights have no effect.
Online contracts are as valid as paper ones, and RA 11967 extends consumer remedies to online purchases.
Act quickly: hidden-defect claims under the Civil Code prescribe six months from delivery.

Frequently asked questions

Does the Consumer Act protect my company when it buys from a supplier?

Generally not. The Consumer Act defines a consumer as a natural person dealing in products or services primarily for personal, family, household or agricultural purposes. A company buying for its operations relies on the Civil Code — including its warranty rules on sales — and, for online deals, the business-to-business coverage of RA 11967.

Can a store’s “no warranty” or “no liability” notice take away a customer’s rights?

Not entirely. For consumer products, stipulations contrary to the Consumer Act’s warranty provisions have no legal effect, and clauses that exonerate or reduce liability for defective products or services are prohibited. Under the Civil Code, a seller who knew about hidden defects cannot rely on a waiver, and any waiver of liability for future fraud is void.

Are online terms and conditions I clicked “I agree” to binding?

Usually, yes. The E-Commerce Act says a contract cannot be denied validity solely because it was formed electronically. But the same Civil Code limits apply: ambiguous terms are construed against the drafter, and terms contrary to law, morals, good customs, public order or public policy are not enforceable.

How long do I have to complain about a defective item?

It depends on the basis of the claim. Civil Code actions for hidden defects prescribe six months from delivery. An express warranty lasts for the period stated in it. For new consumer products, the Consumer Act says implied warranties (other than merchantability that accompanies an express warranty) last not less than 60 days nor more than one year after the sale. Complain as early as you can.

Sources

Sources rechecked as of: September 28, 2026

This article is general legal information, not legal advice. For advice on your specific situation, consult a lawyer or, if you qualify, the Public Attorney’s Office (PAO).

How Philippine Civil Law Applies to Business–Customer Contracts