In the Philippines, it’s very common for clients to ask:

“Nagbayad na ako, hindi pa rin ginawa ang pinangakong serbisyo. Pwede ba siyang kasuhan ng estafa?”

The short answer is: sometimes yes, but very often the answer is no — it’s only a civil case (breach of contract), not a criminal one. Whether it becomes estafa (swindling) under the Revised Penal Code depends on specific facts, especially the presence of fraud or deceit from the beginning.

This article walks through the legal framework, the elements of estafa, how courts distinguish civil breach of contract from criminal fraud, examples, defenses, and practical tips — all in the Philippine context.

1. Legal Basis: Estafa Under the Revised Penal Code

Estafa is primarily found under Article 315 of the Revised Penal Code (RPC). While there are many modes of committing estafa, the two most relevant to service transactions are:

Estafa with abuse of confidence, particularly:
- Art. 315(1)(b) – misappropriation or conversion of money, goods, or any other personal property received in trust, on commission, for administration, or under any other obligation involving the duty to deliver or return the same.
Estafa by means of deceit, particularly:
- Art. 315(2)(a) – by using false pretenses or fraudulent acts executed prior to or simultaneously with the fraud, such as:
  - pretending to possess power, influence, qualifications, property, credit, agency, business or imaginary transactions, or
  - employing other similar deceptive schemes to induce another to part with money or property.

When the issue is failure to perform a service after receiving payment, the usual alleged mode is estafa by deceit, sometimes mistakenly framed as estafa with misappropriation.

2. Typical Scenario: Payment for a Service, Then Non-Performance

Classic real-world situations include:

You pay a contractor to renovate your house; they start a little or not at all, keep asking for money, and then disappear.
You pay someone to process documents (e.g., visas, PRC registration, LTO papers), but nothing is done and they stop communicating.
You pay a freelancer (designer, programmer, consultant) 100% in advance; they fail to deliver anything acceptable and vanish.

The instinct is to file a criminal complaint for estafa, but not all non-performance = estafa. The law draws a line between:

Simple breach of contract (civil liability), and
Fraudulent inducement / misappropriation (criminal estafa).

3. Key Principle: Breach of Contract ≠ Automatically Estafa

Philippine jurisprudence has consistently held that:

Mere failure to comply with a contractual obligation, by itself, does not constitute estafa.

For estafa to exist, there must be a criminal intent to defraud, shown through deceit or misappropriation, not just negligence, delay, or inability to perform.

So if a contractor simply:

Underestimated the cost,
Experienced delays,
Performed poorly,
Or ran out of funds but did not originally intend to cheat,

this will generally be treated as a civil dispute, not a criminal one.

4. When Failure to Perform a Service is Not Estafa

Generally, no estafa if:

The relationship is purely contractual
- You hire someone to do a job for a fee. The money paid is consideration for the service, not something given “in trust” with an obligation to return the same money.
No proof of deceit from the very beginning
- The service provider intended to perform but failed due to:
  - financial issues,
  - mismanagement,
  - shortage of workers,
  - delays, or
  - honest but incompetent performance.
- The intent to defraud must exist at the time of the transaction; if it came later, it’s usually civil, not criminal.
The client’s remedy logically falls under civil law
- Such as:
  - Specific performance (compel completion of service),
  - Rescission of contract,
  - Damages (actual, moral, etc.).

The courts are wary of allowing criminal cases to be used as tools to collect debts or to pressure the other party in ordinary contractual disputes.

5. When Failure to Perform a Service Can Be Estafa

However, there are situations where non-performance of a service does become estafa. The common thread is fraudulent intent and deceit, often present right from the start.

5.1. Estafa by Deceit – Art. 315(2)(a)

To have estafa by deceit in a services situation, typically the following must be proven:

Deceit or false representation
- The accused made false statements or used fraudulent acts about:
  - Their identity,
  - Their qualifications,
  - Their authority,
  - The existence of the project,
  - Their capacity or intention to perform the service.
- The deceit must be prior to or simultaneous with the handing over of the payment.
Reliance by the complainant
- The complainant believed the misrepresentations and was induced to pay money or deliver property.
Damage or prejudice
- The complainant suffered loss (e.g., losing money, time, or opportunity).

Examples where estafa may exist:

Someone pretends to be an accredited immigration agent, shows fake IDs or licenses, collects money for visa processing, then disappears.
A “contractor” falsely claims to work for a reputable firm, fabricates contracts, asks for a huge down payment, then never begins any work.
A person collects payments from numerous people for the same unit or project that doesn’t exist or that they have no right to sell or develop.

In these cases, the deceit is the key. The promise of service is not the only issue; the accused never had a genuine intent or capacity to perform and used lies to get the money.

5.2. Estafa with Abuse of Confidence – Art. 315(1)(b)

This mode involves misappropriation or conversion of money or property received in trust, on commission, or under an obligation to return or deliver the same.

In service arrangements, this may apply if:

The client delivers money not as payment, but:
- as a trust fund for a specific purpose (e.g., “Use this ₱200,000 strictly to pay for government fees, and you must account for it”), and
- the accused instead pockets the money and does not carry out the specific purpose.

Checklist for estafa by misappropriation:

Money or property is received by the accused:
- in trust,
- on commission,
- for administration, or
- under another obligation to deliver or return the same.
The accused misappropriates, converts, or denies receipt of the property.
Prejudice or damage results to the owner.
There is demand to return or account (not strictly an element but very strong evidence of misappropriation if ignored).

In many ordinary service contracts (fixed fee for work), money is not considered “in trust” but rather as payment. That’s why this mode rarely applies unless the arrangement clearly involved entrustment (e.g., “pera ng kumpanya” to be spent on specific, documented purposes).

6. Critical Factor: Intent to Defraud (Animus Fraudandi)

Philippine courts repeatedly stress that criminal liability requires criminal intent. For estafa:

There must be intent to defraud from the outset.
This intent must be proven, not just presumed from non-performance.

Clues courts often look at:

Pattern of conduct
- Did the accused:
  - repeatedly engage in the same scheme?
  - take money from many people under similar false pretenses?
Behavior after receiving money
- Did they:
  - immediately disappear?
  - cut off communication?
  - refuse to give receipts or documents?
  - make obviously fabricated excuses?
Existence (or absence) of partial performance
- Actual efforts, partial work done, legitimate expenses, or attempts to finish can suggest lack of fraudulent intent, although not always conclusive.
Ability to perform vs. impossibility from the very beginning
- If the accused never had the capacity (e.g., not licensed, no rights, no access, no business), it strongly supports a finding of deceit.

7. Distinguishing Civil from Criminal Liability

A recurring theme in decisions is the warning not to criminalize ordinary contract breaches. In deciding whether estafa exists, these questions are essential:

Was there deceit at the start, or only non-performance later?
- If the person honestly thought they could perform but failed, it’s usually civil.
Is the obligation to return the same money, or simply to perform the service?
- If the money is a trust fund, misappropriation is possible.
- If it’s a payment, the recourse is often civil.
Is the complaint mainly about getting money back or about punishing fraud?
- If the complaint reads like a collection case disguised as estafa, prosecutors and courts can dismiss it.

8. Evidence in Estafa Cases Involving Services

8.1. For the Complainant

To support an estafa charge, a complainant typically needs:

Written agreements, quotations, contracts, or proposals;
Proof of payment (receipts, bank transfers, deposit slips, GCASH records, etc.);
Text messages, emails, chats showing:
- false representations (e.g., “I am licensed to do X,” “I already filed your application,” “I have this government connection”),
- promises that were clearly untrue or fraudulent;
Any fake documents or forged IDs used to mislead;
Proof of damage (e.g., lost opportunities, additional costs, duplicate payments).

8.2. For the Accused (Service Provider)

Key documents and evidence that can support a defense:

Legitimate licenses / permits / qualifications;
Receipts, invoices, payrolls, material purchases showing the money was indeed spent for the project or service;
Proof of partial performance (photos of completed work, drafts, progress communications);
Communications offering refunds, adjustments, or revisions;
Evidence of good faith efforts and genuine obstacles (e.g., supplier delays, client’s own breaches).

9. Penalties for Estafa (Amounts and RA 10951)

Penalties for estafa depend on the amount defrauded, and were updated by Republic Act No. 10951, which adjusted the values in the RPC.

In general terms:

The higher the amount, the higher the penalty (ranging from arresto mayor to reclusion temporal).
Estafa is also complex because:
- it can carry both criminal and civil liability (the accused is usually ordered to indemnify the offended party);
- and certain circumstances (like syndicate estafa or large-scale swindling) can trigger harsher special laws.

Exact penalty computations can be technical, but the important practical point is: If the amount is large, the potential jail time can be significant, and the case is taken very seriously.

10. Procedure: How an Estafa Case Typically Proceeds

If someone believes they were defrauded:

Filing a Complaint-Affidavit
- Usually filed with the Office of the City/Provincial Prosecutor where the offense (or any of its elements) occurred.
Preliminary Investigation
- The prosecutor:
  - requires the respondent to submit a Counter-Affidavit;
  - may require position papers or clarifications;
  - then decides whether there is probable cause for estafa.
Information and Court Case
- If probable cause is found, an Information is filed in the proper trial court (MTC or RTC, depending on penalty).
- The court issues a warrant of arrest (unless the case is bailable and the accused posts bail).
Trial
- Both sides present evidence.
- The prosecution must prove all elements of estafa beyond reasonable doubt.

Throughout, civil liability (return of money, damages) can be included in the criminal case or pursued separately.

11. Defenses Commonly Raised in These Situations

A person accused of estafa due to failure to render services may raise:

Lack of deceit
- No false representations; the complainant knew the risks and circumstances.
- All credentials and capabilities were disclosed accurately.
Absence of misappropriation
- The money was used in accordance with the agreement:
  - supplies, wages, fees, overhead, etc.
- Any failure was due to loss, miscalculation, or external problems, not conversion.
Nature of transaction is purely civil
- The dispute is about quality of work, project delays, or disagreements on scope — classic contract issues.
Good faith
- The respondent genuinely believed they could and would perform.
- There were efforts to continue the service or refund the payment.
No damage or prejudice
- For example, the complainant was refunded, or there was no actual loss.

12. Interaction with Other Laws

While the focus here is estafa, related laws can sometimes come into play:

Batas Pambansa Blg. 22 (Bouncing Checks Law)
- If the service provider issues checks (e.g., refunds) that bounce, they may face BP 22 charges, which are separate from estafa.
Special laws on large-scale swindling or syndicated estafa
- If the scheme involves multiple victims and organized groups, stricter rules and heavier penalties may apply.

13. Practical Tips

13.1. For Clients / Customers

To protect yourself:

Get everything in writing:
- contracts, timelines, payment schedules, scope of work.
Check credentials and track record:
- business permits, professional licenses, previous clients.
Avoid paying 100% upfront:
- use staged payments upon clear milestones.
Keep receipts and communications:
- emails, chats, texts, designs, photos.

If something goes wrong:

Formally demand performance or refund (demand letter).
Assess if the facts show mere breach of contract (civil) or deceit/misappropriation (possible estafa).
Consider:
- Civil case for damages,
- Criminal complaint for estafa (if clear evidence of fraud),
- or both, depending on strategy and legal advice.

13.2. For Service Providers

To avoid exposure to estafa complaints:

Be honest about your capacity, timelines, and limitations.
Use clear written contracts with defined scope and disclaimers.
Give official receipts and maintain accounting records.
Regularly update clients on project status.
If delays occur, communicate early and propose reasonable adjustments.
Avoid taking money under “trust” arrangements unless you’re prepared to fully account for it.

If a client files or threatens an estafa case:

Gather all proof of good faith, work performed, and proper use of funds.
Consult a lawyer for response strategy (affidavit, settlement, mediation).

14. Bottom Line

You can be charged with estafa in the Philippines for failing to perform a service after receiving payment — but only if specific conditions are met, particularly:

Deceit or fraud from the beginning, or
Misappropriation of funds received in trust.

If the case is simply about delay, poor workmanship, or non-performance without fraudulent intent, the matter is usually civil, not criminal.

Because the distinction between civil breach and criminal estafa is often fact-intensive and technical, anyone involved in such a dispute — whether client or service provider — should consider consulting a Philippine lawyer to evaluate the documents, communications, and circumstances in detail.

(This article is for general information only and is not a substitute for personalized legal advice.)