Philippine Legal Context for Custom Orders, Downpayments, Cancellations, and Possession

Custom builds are everywhere: tailored furniture, fabricated metal works, bespoke uniforms, custom PCs, vehicle modifications, made-to-order signage, and “ipa-assemble ko ’yan” projects. Disputes often begin the same way—a verbal deal, a partial payment (or none), work starts, then someone backs out. The builder asks: “Pwede ko bang bawiin?” The client asks: “Pwede ko bang kunin na ’yan?”

In Philippine law, the answer depends less on who is “reasonable” and more on (1) what kind of contract it is, (2) who owns the materials and the unfinished item, (3) whether delivery has happened, (4) whether there’s breach, and (5) what remedies were properly exercised.

1) Verbal agreements: valid, but prove it

General rule: form is usually not essential

Under the Civil Code, contracts are generally binding regardless of form as long as the essential requisites are present:

Consent (meeting of minds)
Object (the custom build)
Cause/consideration (price/payment)

So a verbal agreement can be a valid contract.

The practical problem: enforceability and evidence

Some agreements fall under the Statute of Frauds (Civil Code concept) and are generally required to be in writing to be enforceable in court if they remain purely executory (i.e., nothing has been performed). But once there is partial performance—like downpayment, purchase of materials, commencement of fabrication, or partial delivery—courts typically treat that as taking the deal out of the Statute of Frauds problem in many situations.

Bottom line: Verbal can be valid; the real fight is usually proof. Evidence commonly used:

receipts, deposit slips, e-wallet transfers
chat messages and call logs
photos/videos of work progress
purchase receipts for materials tied to the client’s specs
witness testimony (less ideal, but possible)

2) Identify the contract: “sale” vs “piece of work” (custom fabrication)

Custom builds sit in a tricky zone. They can be treated as:

A sale of a movable (if the builder is essentially selling a thing, even if customized), or
A contract for a piece of work / service (if the essence is labor/skill applied to produce something for the client)

This classification matters because it affects ownership, risk of loss, and remedies.

A very practical way to analyze

Courts often look at:

Who supplies the principal materials?
Is the object a thing being sold, or primarily labor and skill commissioned?

For everyday disputes, you can usually resolve the “bawi” question by focusing on two ownership anchors:

Has there been delivery?
Who owns the materials / unfinished work?

3) Ownership and “taking back” usually turns on delivery and materials

A) If the builder supplies the materials and there has been NO delivery

This is the most builder-friendly scenario.

In Philippine sales law principles, ownership generally transfers upon delivery (tradition), not merely upon agreement. If the partially completed custom build has not been delivered, the builder typically still has possession and control, and often still has ownership.

What “take back” means here: If the item is still with the builder, there’s nothing to “take back.” The real question becomes:

Can the builder stop work, cancel, keep the unfinished item, or charge for costs?

Generally:

The builder may suspend performance if the client fails to pay as agreed.
The builder may seek rescission/cancellation and damages if the client is in breach—though unilateral rescission is safest when clearly justified and properly documented, and disputes often end up in court/settlement if contested.

Risk: If the builder later sells a highly customized item, resale may be impractical; legally, selling it to cover the client’s unpaid balance can be complicated without proper basis (e.g., a valid lien/pledge arrangement and lawful foreclosure process).

B) If the builder supplies the materials BUT there has been delivery to the client

Now it becomes dangerous to “bawi” through self-help.

If the client already has the item (even partially completed) because it was delivered, ownership may already have transferred depending on the agreement and circumstances. Even if the client hasn’t fully paid, the builder’s remedy is typically to collect, not to forcibly repossess—unless there is a lawful repossession mechanism (which is much more common in financed sales of motor vehicles, not typical informal custom jobs).

Key warning: Trying to physically retrieve property from someone who possesses it can expose the builder to criminal and civil liability, especially if force, intimidation, or stealth is involved, or if ownership is disputed. Even if the builder believes they have a right, self-help can escalate into allegations like theft/robbery or other offenses depending on facts.

C) If the CLIENT supplied the materials (e.g., “ito ’yung parts/wood/metal”)

This is the most client-protective scenario.

If the client provided the materials, then:

The materials are the client’s property, and
The builder is applying labor to client-owned property.

Here, “taking back” by the builder is usually not appropriate, because the builder would be taking someone else’s property (the supplied materials and whatever they have become).

But the builder is not helpless. Philippine civil law recognizes concepts akin to:

Right to be paid
Potential right of retention in certain circumstances (i.e., holding the thing until paid), and
Preference of credits / lien-like protections for labor or repairs on movables in proper cases

These are fact-specific and are safest when exercised as retention (keeping possession) rather than taking from the client.

4) “Downpayment,” “deposit,” and “earnest money” are not all the same

Many disputes are fueled by unclear words:

“Deposit” might mean reservation money, or it might mean partial payment.
“Downpayment” is usually partial payment.
“Earnest money” (arras) in sales is generally treated as part of the price and proof of perfection of sale—not automatically forfeitable unless the contract clearly makes it so and the legal requirements for forfeiture are met.

Common mistake: assuming automatic forfeiture

In the Philippines, forfeiture is not automatic just because someone cancels, unless the agreement clearly supports it and the surrounding law and fairness principles don’t forbid it in context.

A more legally defensible approach is to treat money according to:

Actual costs incurred (materials bought, labor done)
Agreed cancellation terms (if any)
Unjust enrichment principles (no one should unfairly benefit at another’s expense)

5) If the client cancels mid-build: who owes what?

The usual equitable outcome: pay for value received / costs incurred

Philippine law recognizes unjust enrichment (Civil Code principle) and quantum meruit-type recovery (reasonable value of work), often used when:

there is a contract but terms are unclear, or
performance is partially completed, or
the contract is terminated but work already benefitted the other party.

So if the client cancels:

The builder may generally claim reasonable compensation for labor performed and reimbursement for materials specifically acquired/used for the project (especially non-reusable materials).
The client may generally claim return of any excess payment beyond the value of work/materials already provided.

Practical rule: Cancellation does not automatically mean “builder keeps everything” or “client gets everything back.” Courts often try to land on fair allocation supported by receipts, time logs, and deliverables.

6) If the client fails to pay: can the builder cancel and keep the item?

A) Right to suspend performance

If the payment schedule is part of the deal, nonpayment can justify suspending work—particularly if continued work increases the builder’s exposure.

B) Rescission/cancellation (Civil Code concept)

For reciprocal obligations (work vs payment), the injured party may seek rescission when the other party commits a substantial breach. In practice:

Builders often send a written demand giving a deadline to pay and warning that the contract will be considered cancelled.
If the client disputes, the matter can become a court issue. Unilateral cancellation without a clear contractual clause is not always risk-free, but it is commonly asserted and later tested.

C) Keeping the unfinished build

If the builder owns the materials and there has been no delivery, keeping the unfinished item is often legally safer than “bawi” from the client—because it never left the builder’s possession.

But if the client paid significant amounts, the builder may still need to account for:

value retained,
value delivered (if any),
whether keeping everything would cause unjust enrichment.

7) The “right of retention” and lien-like protections: holding vs taking

In custom builds involving movables (personal property), builders often ask: “Pwede ko bang i-hold ’yung item hangga’t di bayad?”

A retention approach—keeping possession of the item already in your workshop until paid—tends to be legally safer than retrieval from the client.

Philippine law has mechanisms recognizing priority or preference for certain credits related to a movable (e.g., labor, repair, preservation) and recognizes that possession can matter. However:

The scope and proper application can be fact-intensive, and
Improper “retention” can still be challenged if it becomes abusive or covers amounts not legitimately due.

Safe principle: If you already lawfully possess the item, “hold pending payment” is usually far safer than “take it back” once it is with the other party.

8) Self-help “bawi” is where people get into trouble

Even if a builder believes they have a right, physically retrieving the item can trigger:

Civil claims (damages, replevin actions, injunctions)
Criminal complaints depending on circumstances (allegations often arise when entry is unauthorized, force is used, or property ownership is disputed)

What makes self-help risky:

Ownership may not be as clear as you think (delivery, payment, agreement)
Possession is protected; disputes are meant to be resolved through lawful processes
Once police/blotter enters the picture, the issue can quickly escalate beyond the original debt

General safety line:

If it’s still with you: you can usually stop work, retain, demand, and account.
If it’s already with them: focus on demand and lawful recovery, not physical repossession.

9) Remedies and legal actions commonly used in Philippine disputes

A) Demand letter and documentation

A written demand typically sets out:

what was agreed,
what has been done,
what remains unpaid,
deadline to comply,
consequences (suspension, cancellation, claim for costs/damages)

Even if the deal was verbal, a demand letter helps frame the dispute and shows good faith.

B) Barangay conciliation (Katarungang Pambarangay)

For many local disputes between individuals within the same locality (with exceptions), barangay mediation/conciliation is commonly required before filing certain court actions.

C) Small claims (money recovery)

If the main goal is to recover money (unpaid balance, reimbursement), small claims can be a practical route when the claim fits the rules and threshold set by the Supreme Court at the time of filing.

D) Civil actions involving the thing itself

If the dispute is about who should possess the item, parties may pursue actions aimed at recovery of possession (often more complex than simple collection).

10) Scenario guide: “Can I take it back?” (Quick legal orientation)

Scenario 1: Builder has the item; client hasn’t paid as agreed

Usually: Builder can withhold release, suspend work, and demand payment. “Taking back” is irrelevant because it’s still with builder.

Scenario 2: Builder delivered the partially completed item; client stops paying

Usually: Avoid self-help repossession. Consider demand + collection or appropriate civil remedies. Repossession without clear legal basis is risky.

Scenario 3: Client supplied key materials; builder wants to keep or retrieve the build

Usually: Builder should not “take” client-owned materials. Builder may claim payment and may sometimes retain while in lawful possession until paid, but must account properly.

Scenario 4: Client cancels after builder bought materials specifically for the job

Usually: Builder may recover costs + reasonable value of work, less anything refundable, guided by receipts and fairness.

11) How to prevent the dispute next time (the clauses people skip)

Even a one-page written agreement (or clear chat terms) helps enormously. Key items:

Detailed specs and scope (what exactly is being built)
Milestone payments and when release happens
Ownership and possession rules before full payment
Clear cancellation policy (who pays what if cancelled midstream)
Treatment of deposit/downpayment (refundable? forfeitable? conditions)
Timeline and what counts as delay
What happens to custom parts/materials if the client backs out

12) Core takeaways in Philippine context

Verbal contracts can be valid, but proof and clarity become the battle.
The legality of “bawi” depends heavily on delivery and material ownership.
If the item is still with the builder, retaining it pending payment is generally safer than any “retrieval.”
Once the item is with the client, self-help repossession is legally risky and can spiral into civil/criminal trouble.
When a custom build is partially completed and the relationship collapses, courts often gravitate toward costs incurred + reasonable value of work, avoiding unjust enrichment on either side.