Completing a construction project or a service contract only to face non-payment is a common grievance for contractors in the Philippines. While the situation is frustrating, the Philippine legal system provides several avenues—ranging from amicable settlements to judicial intervention—to recover what is rightfully yours.

1. Pre-Litigation Steps: The "Paper Trail"

Before rushing to court, you must ensure your procedural house is in order. Most construction contracts include specific dispute resolution clauses that must be followed first.

Final Billing and Statement of Account: Ensure you have formally served the final progress billing.
The Demand Letter: This is a non-negotiable step. A formal Letter of Demand (preferably prepared by a lawyer) must be sent to the client. It should state:
The total amount due.
The basis for the claim (the Contract).
A specific period (e.g., 7 to 15 days) to settle the amount.
A clear statement that failure to pay will result in legal action.

Note: Under the Civil Code, "mora" or legal delay generally begins only when the creditor makes a judicial or extrajudicial demand. No demand, no delay.

2. Mandatory Mediation (Katarungang Pambarangay)

If the contractor is an individual (not a corporation) and the client is also an individual residing in the same city or municipality, the case must generally pass through the Barangay Conciliation process.

A Certificate to File Action is required before a court will entertain the lawsuit.
Exception: If one party is a corporation or if the parties reside in different cities/provinces, this step is usually bypassed.

3. Judicial Remedies: Where to File?

The venue and type of case depend largely on the amount of money involved and the nature of the contract.

A. Small Claims Cases

If the claim is purely for a sum of money and does not exceed PHP 1,000,000.00 (as per current OCA circulars), you can file a Small Claims case.

Pros: No lawyers are allowed during the hearing; it is inexpensive and fast.
Process: You fill out standardized forms and submit evidence (contracts, receipts, demand letters).

B. Collection of Sum of Money (Ordinary Civil Action)

If the claim exceeds the Small Claims limit, you must file a formal civil case for "Collection of Sum of Money and Damages."

Jurisdiction: * Metropolitan/Municipal Trial Courts: Claims up to PHP 2,000,000.00.
Regional Trial Courts (RTC): Claims exceeding PHP 2,000,000.00.

4. Construction Industry Arbitration Commission (CIAC)

This is a specialized body for construction disputes. If your contract contains an Arbitration Clause stating that disputes shall be submitted to the CIAC, the regular courts will likely dismiss your case and refer you there.

Why CIAC? It is composed of technical experts (engineers and architects) and lawyers, making it more efficient for complex construction disputes involving technical "punch lists" or variations.

5. Legal Grounds for Recovery

Under the Civil Code of the Philippines, several principles support your claim:

Article 1159: Obligations arising from contracts have the force of law between the parties.
Article 1725: The owner may withdraw from the construction of the work at will, but must indemnify the contractor for all expenses, work, and the profits the contractor would have obtained.
Contractor’s Lien (Article 2242): Contractors have a preferred claim over the specific immovable property (the building) for the unpaid value of the work done or materials furnished.

6. Alternative Strategies

Notice of Lien: Informing the bank or the financing institution of the project that there is a pending dispute may sometimes freeze the release of further funds to the owner.
Criminal Complaint for Estafa: This is generally difficult in pure breach of contract cases. However, if the client issued a "bouncing check" (BP 22) as payment, you can file a criminal case, which often leads to faster settlements because of the threat of imprisonment.

Key Evidence to Gather

The Signed Contract: Including any addendums or Change Orders.
Certificates of Completion: Or "Turnover Receipts" signed by the owner.
Proof of Occupancy: If the owner has already moved in or is using the facility, it implies "substantial completion."
Correspondence: Emails, Viber messages, or letters acknowledging the debt.

Would you like me to draft a template for a formal Demand Letter tailored to a construction contract?