Remedies for Non-Payment or Non-Performance in the Philippines
When someone does not pay or does not perform what they owe you, Philippine law gives you a remedy matched to the kind of obligation. For money, you collect the debt plus interest. For a promise to deliver, do or not do something, you can demand performance, have it done or undone at the debtor’s cost, cancel a reciprocal contract, and claim damages.
This guide is organised by what was promised, because that is what decides your remedy. If you already know you are dealing with a two-sided contract and only need to choose between enforcing it and cancelling it, read our comparison of specific performance vs resolution vs damages. If you are not yet sure the other side is actually in breach, start with what counts as a breach of obligation.
What remedy fits the obligation that was broken?
The Civil Code defines an obligation as “a juridical necessity to give, to do or not to do” (Art. 1156). Each type has its own built-in remedy, and damages can be added on top when the debtor was guilty of fraud, negligence or delay, or “in any manner contravene[d] the tenor” of the obligation (Art. 1170).
| What was promised | Main remedy | Legal basis |
|---|---|---|
| Payment of a sum of money | Collect the amount plus stipulated interest, or 6% legal interest from delay if none was agreed | Arts. 1169, 2209 |
| Delivery of a specific (determinate) thing | Compel delivery of that exact thing, plus damages | Arts. 1165, 1170 |
| Delivery of a generic thing | Have the obligation fulfilled by someone else at the debtor’s expense, plus damages | Art. 1165 |
| Doing a service or work | Have it done by another at the debtor’s cost; poorly done work may be ordered undone | Art. 1167 |
| Not doing something | Have what was forbidden undone at the debtor’s expense, plus damages | Art. 1168 |
| Reciprocal contract (both sides owe) | Choose fulfillment or rescission (resolution), with damages in either case | Art. 1191 |
One caution on personal services: courts do not physically force a person to perform work. That is why Art. 1167 lets the work be “executed at his cost” by someone else, rather than ordering the debtor to perform it personally.
What can I do if someone simply won’t pay a debt?
Non-payment of money is the most common case. Your core remedy is an action to collect the principal, plus interest as damages for the delay. Under Art. 2209, if the debtor incurs delay in paying a sum of money and there is no contrary stipulation, the damages are “the payment of the interest agreed upon, and in the absence of stipulation, the legal interest, which is six per cent per annum.”
In Nacar v. Gallery Frames (G.R. No. 189871, 13 August 2013), the Supreme Court applied BSP Monetary Board Circular No. 799, which set 6% per year as the rate for loans or forbearance of money, and the rate allowed in judgments, when no rate was agreed, effective 1 July 2013. The 12% rate applies only to periods up to 30 June 2013. For how interest is computed and when it starts running, see our guide on legal interest on unpaid debts.
Three practical points change the money remedy:
- Demand usually matters. A debtor is generally in delay only from the time you demand payment, in or out of court (Art. 1169). Exceptions: when the contract or law says demand is not needed, when time was a controlling motive, or when demand would be useless.
- A penalty clause may replace interest. If the contract has a penalty, the penalty substitutes for damages and interest unless the contract says otherwise (Art. 1226), and courts may reduce an unconscionable penalty (Art. 1229). See liquidated damages vs penalty clause.
- Partial payment is not full payment. A debt is paid only when the thing or service is “completely delivered or rendered” (Art. 1233). But if you knowingly accept an incomplete or irregular performance without protest, the obligation is deemed fully complied with (Art. 1235). Protest in writing when you accept partial payment.
Non-payment of a debt is a civil matter. You cannot have someone jailed merely for failing to pay. Criminal routes exist only in specific situations, such as a bounced check or money received in trust and misappropriated, which need their own analysis. Our guide to handling a civil dispute over unpaid debt walks through the full collection process from both sides.
What if they won’t deliver, finish the work or stop doing something?
Specific things. If the obligation is to deliver a determinate thing, such as a particular car, a titled lot or a unique item, you may “compel the debtor to make the delivery” (Art. 1165). If the debtor is already in delay, or promised the same thing to two or more people, the debtor also bears the risk of fortuitous events until delivery.
Generic things. If the thing is generic (for example, 500 bags of cement of a stated grade), you may ask that the obligation be complied with at the debtor’s expense (Art. 1165), typically by sourcing the goods elsewhere and charging the cost difference to the debtor.
Work or services. If a contractor abandons a job or does it in a way contrary to what was agreed, “the same shall be executed at his cost,” and the court may decree that what was poorly done be undone (Art. 1167). Keep proof of the cost of the replacement contractor. Courts award actual damages only on proof.
Obligations not to do. If someone promised not to do something, for example not to build above a certain height or not to compete, and does it anyway, it “shall also be undone at his expense” (Art. 1168).
When can I cancel the contract instead of enforcing it?
In reciprocal obligations, where each side owes the other (sale, lease, construction, supply), the power to rescind is implied. The injured party “may choose between the fulfillment and the rescission of the obligation, with the payment of damages in either case,” and may still seek rescission after choosing fulfillment if fulfillment becomes impossible (Art. 1191). The court may give the debtor a period instead of cancelling if there is just cause. Rights of third persons who already acquired the thing in good faith are protected.
Resolution is generally for a substantial breach, not a minor one, and it usually means both sides return what they received. See resolution under Article 1191 for the details. Two limits apply before you cancel:
- You must be ready to perform your own side. In reciprocal obligations, neither party is in delay if the other has not complied or is not ready to comply (Art. 1169).
- Special laws can override. Installment buyers of residential real estate may be protected by the Maceda Law, and installment buyers of personal property by the Recto Law. Check these before cancelling a sale.
What damages can I add, and what reduces them?
Actual damages cover both the loss suffered and the profits you failed to obtain (Art. 2200). A debtor who acted in good faith answers only for damages that were the natural and probable consequences of the breach and that the parties foresaw or could reasonably have foreseen when the obligation was made. A debtor in fraud, bad faith, malice or wanton conduct answers for all damages reasonably attributable to the non-performance (Art. 2201).
Interest on unliquidated damages is not automatic. It is recoverable only when the claim “can be established with reasonable certainty” (Art. 2213), and interest on damages for breach of contract is in the court’s discretion (Art. 2210). For proof and computation, see how damages are calculated in a Philippine civil case.
What defenses can the other side raise?
Before you file, test your claim against the defenses the debtor is likely to raise. Each one can reduce or defeat your remedy.
| Defense | What the debtor argues | Legal basis |
|---|---|---|
| Fortuitous event | Non-performance came from an unforeseeable or inevitable event, unless law, contract or the nature of the obligation shifts the risk | Art. 1174 |
| No demand yet | The debtor was not in delay because no demand was made and no exception applies | Art. 1169 |
| You breached first | In a reciprocal contract, the creditor did not comply or was not ready to comply | Arts. 1169, 1191 |
| Performance accepted | The creditor knowingly accepted incomplete performance without protest | Art. 1235 |
| Prescription | The action was filed too late for its type | Arts. 1144–1146 |
| Penalty only | The penalty clause replaces damages and interest, and should be reduced if unconscionable | Arts. 1226, 1229 |
If you are the debtor and the creditor refuses your payment without just cause, you can protect yourself by tendering payment and then consigning the amount with the court. Consignation releases the debtor, and it can be used without prior tender in cases such as an absent or unknown creditor or two people claiming the same right to collect (Art. 1256).
What if the debtor is hiding or moving assets?
Winning a judgment means little if the debtor has nothing left to pay with. The law gives creditors extra tools:
- Preliminary attachment. Under Rule 57, Sec. 1 of the Rules of Court, a plaintiff may ask the court to attach the defendant’s property as security, at the start of the case or any time before judgment, on specific grounds. These include a debtor about to leave the country to defraud creditors, fraud in contracting or performing the obligation, and removing or disposing of property to defraud creditors. A bond and supporting affidavit are required.
- Exercising the debtor’s rights. After going after the debtor’s property, creditors may exercise the debtor’s own rights and actions (except purely personal ones) to collect, and may challenge acts the debtor did to defraud them (Art. 1177).
- Rescinding transfers in fraud of creditors. Contracts made in fraud of creditors are rescissible when the creditor cannot collect in any other way (Art. 1381(3)). This action is subsidiary (Art. 1383) and must be brought within four years (Art. 1389).
How long do I have to file?
| Type of claim | Period | Legal basis |
|---|---|---|
| Written contract, obligation created by law, or judgment | 10 years from accrual | Art. 1144 |
| Oral contract or quasi-contract | 6 years | Art. 1145 |
| Quasi-delict or injury to rights | 4 years | Art. 1146 |
| Rescission of a contract in fraud of creditors | 4 years | Art. 1389 |
Prescription is interrupted by filing in court, by a written extrajudicial demand from the creditor, and by any written acknowledgment of the debt by the debtor (Art. 1155). A text-message reminder may not be enough to interrupt prescription. Send a proper written demand. More detail is in our guide to prescription of contract actions.
Your options and what to do next
Work through these steps in order. Do not skip straight to court if an earlier step is legally required or would resolve the matter more cheaply.
- Identify the obligation and gather proof. Pull together the contract or loan document, receipts, delivery records, bank transfers, statements of account, photos of defective work, and messages showing the promise and the default.
- Send a written demand. State what is owed, the deadline to comply, and what you will do if they do not. This puts the debtor in delay (Art. 1169) and interrupts prescription (Art. 1155). Use our guide on demand letters for breach of contract. Send it by registered mail or courier with proof of receipt.
- Try settlement. A written payment plan or completion schedule, signed by both sides, is often the fastest recovery.
- Go to the barangay if required. Disputes between individuals who live in the same city or municipality generally must go through Katarungang Pambarangay conciliation before court, subject to exceptions under the Local Government Code. Bring your documents to the barangay where the respondent lives. If settlement fails, ask for the certificate to file action.
- Choose your court route. For a purely money claim within the Supreme Court’s small-claims ceiling, file a small claims case. It uses standard forms, lawyers do not appear at the hearing, and decisions are quick. Check the current ceiling with the court or the Supreme Court before filing. For larger money claims, specific performance, resolution or damages, file an ordinary civil action. Under RA 11576, first-level courts (MTC/MeTC/MCTC) hear money demands up to ₱2,000,000, exclusive of interest, damages, attorney’s fees and costs. Regional Trial Courts hear larger claims. See small claims vs regular civil action.
- Ask for provisional relief if assets are at risk. If you have evidence that the debtor is hiding property or committed fraud, ask your lawyer about preliminary attachment under Rule 57.
- Get help if you cannot afford a lawyer. The Public Attorney’s Office (PAO) helps qualified indigent litigants, and IBP legal aid chapters are another option.
Your first action today: write a one-page timeline of what was promised, when it was due, what was paid or delivered, and every follow-up. Then send a dated written demand that refers to that timeline.
Key takeaways
- The remedy follows the obligation: collect money, compel delivery, have work done or undone at the debtor’s cost, or cancel a reciprocal contract (Arts. 1165, 1167, 1168, 1191).
- Damages can be added when the debtor was guilty of fraud, negligence, delay or contravention (Art. 1170).
- For money debts without agreed interest, legal interest is 6% per year from delay (Art. 2209; Nacar).
- A written demand usually starts delay and interrupts prescription (Arts. 1169, 1155).
- Expect defenses: fortuitous event, your own breach, accepted performance, prescription.
- Barangay conciliation, small claims or an ordinary action — pick the route that fits the amount and relief you need.
Frequently asked questions
Can I charge interest if our agreement did not mention any?
Yes, as damages for delay. Art. 2209 allows legal interest of 6% per year on a money debt from the time the debtor is in delay, usually from your demand. That is different from conventional interest on a loan. Under Art. 1956, conventional interest must be expressly stipulated in writing.
Can I just keep the other side’s deposit or take their property?
Only if your contract or the law allows it. Forfeiture of a down payment or deposit depends on the contract and on special laws such as the Maceda Law. Taking property without consent or a court order can expose you to civil and even criminal liability. Use demand, settlement or a court case instead.
Do I need a lawyer to recover unpaid money?
Not for small claims, where lawyers do not appear at the hearing and the court provides forms. For ordinary civil actions, provisional remedies or resolution of a contract, a lawyer is strongly advisable. PAO may represent you if you qualify.
What if the debtor offers to pay but only in installments?
You are not required to accept partial payments unless your contract allows them. If you do accept, put the payment plan in writing and state that acceptance is without waiver of your claim to the balance and interest. Otherwise, knowingly accepting incomplete performance without protest may count as full compliance (Art. 1235).
Sources
- Civil Code of the Philippines (RA 386) — Arts. 1144–1146, 1155, 1156, 1165, 1167–1170, 1174, 1177, 1191, 1226, 1229, 1233, 1235, 1256, 1381, 1383, 1389, 1956, 2200, 2201, 2209, 2210, 2213
- Nacar v. Gallery Frames, G.R. No. 189871 (13 August 2013) — 6% legal interest under BSP-MB Circular No. 799
- 1997 Rules of Civil Procedure — Rule 57, Sec. 1 (grounds for preliminary attachment)
- Republic Act No. 11576 — jurisdiction of first- and second-level courts
- Local Government Code (RA 7160) — Katarungang Pambarangay
- Public Attorney’s Office
Sources rechecked as of: 6 October 2026
This article is general legal information, not legal advice. For advice on your specific situation, consult a lawyer or the Public Attorney’s Office.