When someone signs a payment agreement in the Philippines and then refuses or fails to pay, you can sue—but how you go about it, where you file, and what you need to prepare all depend on the details of your contract and the amount involved.

Below is a detailed, Philippine-context guide on suing for breach of a signed payment agreement.

⚠️ This is general legal information, not a substitute for advice from a Philippine lawyer who can review your specific documents.

1. What Is a “Payment Agreement”?

A payment agreement is any written document where one party (debtor) promises to pay money to another (creditor), often with terms on:

Amount borrowed or due
Payment schedule (due dates, installments)
Interest rate (if any)
Penalties/charges for late payment
Consequences of default

Common examples:

Promissory note
Loan agreement
Installment purchase agreement
Acknowledgment of debt
Compromise agreement with payment terms
Restructured payment agreement after prior default

If it is signed (and ideally notarized), it becomes strong documentary evidence in court.

2. Legal Basis Under Philippine Law

2.1. Obligations and Contracts

Key Civil Code ideas:

Obligation: A juridical necessity to give, to do, or not to do something (e.g., to pay ₱100,000 on a certain date).
Contract: A meeting of minds between two persons whereby one binds himself, with respect to the other, to give something or to render some service.

Your payment agreement is usually a contract of loan, sale on installment, or compromise, which creates an obligation for the debtor to pay.

2.2. Breach or Default (Mora Solvendi)

A debtor is in default when:

The obligation is due and demandable,
The creditor has made a demand (judicial or extra-judicial), and
The debtor still fails to comply.

In many contracts with a fixed due date, courts may consider default starting from that date even without a demand, but sending a demand letter is still very important as evidence.

3. Before You Sue: Pre-Litigation Steps

Before running to court, it’s usually expected (and often strategic) to try certain steps.

3.1. Review the Contract

Check the signed document for:

Correct names and signatures
Amounts and due dates
Interest rate and how it is computed
Penalties and late charges
Any venue stipulation (e.g., “Any case shall be filed in the proper courts of Makati City”)
Attorney’s fees clauses (e.g., “In case of default, debtor shall pay 25% of the amount due as attorney’s fees.”)

These terms will guide what you can claim.

3.2. Prepare and Send a Demand Letter

A well-crafted demand letter usually contains:

Identification of parties
Reference to the payment agreement (date, type, key terms)
Statement of amount due (principal, interest, penalties up to a certain cut-off date)
Clear demand to pay within a specific period (e.g., 5, 10, or 15 days)
Warning that failure will result in legal action

Important: Keep proof of sending and receipt, such as:

Courier receipt with tracking
Registered mail with return card
Printed or screenshot emails/messages with confirmations
Acknowledgment if hand-delivered

This will later help prove that the debtor was properly placed in default.

3.3. Attempt Negotiation or Settlement

Courts encourage settlement. You might:

Agree on restructuring (new schedule, reduced monthly payments)
Accept partial payment with written acknowledgment
Enter into a compromise agreement with clear terms and, ideally, notarization

If settlement fails or debtor is obviously stalling, legal action becomes more reasonable.

4. Is Barangay Conciliation Required?

Under the Katarungang Pambarangay Law, many disputes must first go through Lupong Tagapamayapa (barangay conciliation) if:

The parties are natural persons (not corporations),
They live in the same city/municipality (or territorial guidelines apply), and
The dispute is a civil matter (like nonpayment of debt) and not excluded by law.

If required and you skip barangay conciliation, your case might be dismissed for lack of jurisdiction.

Exceptions (where barangay conciliation is usually not required):

One party is a corporation, partnership, or juridical entity
The parties live in different cities/municipalities (subject to some exceptions)
Urgent legal action is necessary (e.g., to prevent prescription or loss of property)

If conciliation is done and settlement fails, you will receive a Certification to File Action, which you will later attach to your Complaint.

5. Choosing the Type of Case and Court

5.1. Nature of the Case

For breach of a payment agreement, the typical case is:

Civil action for sum of money / collection of sum of money, sometimes also with damages.

The main relief is:

Specific performance – compelling the debtor to pay the amount due, plus interest and damages.

5.2. Jurisdiction (Which Court?)

Philippine courts’ jurisdiction in civil cases is generally based on the amount involved, excluding interest, damages, attorney’s fees, and costs (though the exact computation can be nuanced).

Small Claims Court (SCC) – handled by the first-level courts (MeTC/MTC/MCTC), for money claims up to a certain monetary threshold set by the Supreme Court (this amount has changed over time, so you must check the latest rules).
First-Level Courts (MeTC/MTC/MCTC) – for civil cases involving claims within a certain monetary range.
Regional Trial Court (RTC) – for higher-value claims above the jurisdiction of first-level courts.

Because the monetary thresholds change periodically, it’s safest to verify the current jurisdictional amounts or ask a lawyer/court staff before filing.

5.3. Venue (Where to File?)

Venue rules for personal actions (like collection of money):

Where plaintiff resides, or
Where defendant resides,
Or as stipulated in the contract, if the stipulation is valid and exclusive (e.g., “Venue shall exclusively be in the proper courts of Quezon City.”).

If there is a valid venue stipulation that is “exclusive,” filing elsewhere may be grounds for dismissal.

6. Special Track: Small Claims Cases

If the amount falls under the small claims threshold, you may file a Small Claims Case in the appropriate first-level court.

Key features:

Simple, faster procedure
Typically no lawyers appearing for parties (though a lawyer may help prepare documents)
Uses standard forms provided by the court
One-day hearing; judgment is usually final and unappealable (except under very limited grounds, depending on current rules)

To file a small claim, generally you prepare:

Verified Statement of Claim (on court form)
Affidavits of witnesses
Copies of the payment agreement and demand letters, plus proof of sending
Proof of payments already made, if any (for computing balance)
Payment of docket and legal fees (often lower than regular civil actions)

7. Regular Civil Action for Collection of Sum of Money

For higher amounts or when small claims is not available, you file a regular civil case.

7.1. Basic Pleadings

You typically file:

Complaint
- Parties’ names and addresses
- Jurisdictional facts (amount, venue, barangay conciliation if applicable)
- Statement of material facts: existence of payment agreement, loan or obligation, default
- Cause(s) of action (e.g., breach of contract, failure to pay despite demand)
- Prayer: Amount due, interest, penalties, attorney’s fees, costs, other relief
Verification and Certification Against Forum Shopping
- Sworn statement that you are not filing similar cases in multiple courts.
Attachments:
- Copies of the signed payment agreement
- Demand letters and proof of receipt
- Barangay Certification to File Action (if required)
- Any receipts or evidence of partial payments
- Affidavits and other supporting documents (where applicable)

7.2. Filing and Payment of Docket Fees

You file your Complaint with the correct court and pay the corresponding docket and legal fees, which are usually computed based on the amount claimed. If you fail to pay the correct fees, the filing may be defective.

8. The Court Process: From Filing to Judgment

Roughly, the process looks like this:

Filing of Complaint and payment of docket fees.
Issuance and service of summons to the defendant.
Defendant’s Answer
- Usually within 30 days from service of summons in regular actions, shorter for certain summary procedures.
- Defendant may raise defenses (e.g., payment, invalidity of contract, lack of consent, forgery, lack of consideration, etc.).
Failure to Answer
- Plaintiff may move to declare defendant in default and present evidence ex parte.
Pre-Trial and Court-Annexed Mediation
- Parties are required to appear (personally) at pre-trial.
- The court explores possible settlement.
- Failure of plaintiff to appear can cause dismissal; failure of defendant to appear may lead to being declared in default.
Trial
- Presentation of plaintiff’s evidence: original contract, demand letters, witnesses, computation of amount due, etc.
- Cross-examination by the defense.
- Defendant’s turn to present evidence.
Submission for Decision
- After trial, the case is submitted for decision.
Judgment
- Court may order the debtor to pay principal, interest, penalties (if valid), and possibly attorney’s fees and costs, or it may dismiss the case in whole or in part.

9. Evidence: Making the Signed Document Work for You

9.1. The Signed Document

Your signed agreement is typically the primary evidence. Things to consider:

Original vs. Photocopy – Courts usually require the original under the Best Evidence Rule, unless you prove a valid excuse for not presenting it.
Notarization –
- A notarized document becomes a public document and enjoys a presumption of regularity and due execution.
- It’s harder to dispute and carries more evidentiary weight, though still rebuttable.

9.2. Proving the Obligation and Default

Other important evidence:

Proof of release of funds (if it’s a loan): deposit slips, bank transfers, receipts.
Payment history: receipts, bank statements, ledgers, text/email acknowledgments.
Demand letters and proof of receipt.
Communications wherein debtor admits or acknowledges the debt.

9.3. Electronic Contracts and Signatures

Under the E-Commerce Act (RA 8792), electronic documents and electronic signatures can be legally valid and enforceable, subject to certain requirements:

Evidence may include: emails, PDFs, online transaction logs, screenshots of chats (with proper authentication), etc.
The court may require proof that the electronic signature is attributable to the debtor.

10. How Much Can You Claim?

10.1. Principal and Interests

You can usually claim:

Principal amount due (after deducting payments already made).
Contractual interest if there is a written stipulation.
- Under the Civil Code, interest must be expressly stipulated in writing to be enforceable as compensatory interest.
- Courts can strike down unconscionable or iniquitous interest rates and reduce them to a reasonable level.

10.2. Penalties and Liquidated Damages

If your contract provides for:

Penalty charges (e.g., x% per month for late payment), or
Liquidated damages (fixed amount or percentage upon default),

Courts may enforce them, but they also have power to reduce them if they are unconscionable or if the debtor has substantially complied.

10.3. Attorney’s Fees and Costs of Suit

If there is an attorney’s fees clause, you can pray for that amount. Even without such a clause, you may still be awarded attorney’s fees in certain instances (for example, when the debtor’s act or omission has compelled you to litigate).

Courts typically do not automatically grant the full amount prayed for and may fix an amount deemed reasonable.

11. Time Limits: Prescription

Actions based on a written contract (like a signed payment agreement) generally prescribe in 10 years from when the cause of action accrues (i.e., when the debtor fails to pay despite the obligation being due).

For example:

If the contract says payment is due on January 1, 2025, and debtor fails to pay on that date, the 10-year prescriptive period typically starts then (subject to nuances like demand requirements and interruptions).

Events that may interrupt prescription:

Filing a case in court
Written acknowledgment of the debt by the debtor
Certain extrajudicial demands (depending on circumstances and jurisprudence)

If you wait too long (beyond the prescriptive period), your claim may be dismissed even if morally valid.

12. After Winning: Enforcing the Judgment

Winning a case does not automatically put money in your pocket; you must often go through execution.

12.1. Motion for Execution

If the judgment becomes final and executory (no appeal, or appeal resolved), you may file a Motion for Execution.

The court may issue a Writ of Execution directing the sheriff to enforce the judgment.

12.2. How Judgments Are Enforced

Sheriff may:

Garnish bank accounts or receivables of the debtor.
Levy on personal property (vehicles, equipment, etc.) and later auction them.
Levy on real property (land, house) and auction them, subject to legal requirements and exemptions.

If the debtor has no assets or they are hidden, enforcement can be challenging. This is why, when drafting the original payment agreement, it can be strategic to:

Obtain a co-maker, guarantor, or surety
Secure the obligation with chattel mortgage or real estate mortgage

These securities give you more options during enforcement.

13. Multiple Debtors, Guarantors, and Sureties

13.1. Joint vs. Solidary Liability

Joint: Each debtor is liable only for his share.
Solidary: Each debtor can be compelled to pay the entire obligation, and then seek reimbursement from co-debtors.

If the contract says the debtors are “jointly and severally liable” or “solidarily liable,” you may sue any one or all of them for the entire amount.

13.2. Guarantor vs. Surety

Guarantor: Liable only if the principal debtor cannot pay after creditor exhausts remedies.
Surety: Primarily and directly liable as if he were the principal debtor.

The exact wording of your agreement matters greatly here.

14. Practical Tips When Drafting or Enforcing Payment Agreements

14.1. When Drafting

Make sure the names and identifying details (e.g., ID numbers) are accurate.
Clearly state:
- Principal amount
- Due date(s) and payment schedule
- Interest rate and how it is computed
- Penalty rates for late payment
- Any venue stipulation
- Attorney’s fees clause
Consider notarization for stronger evidentiary value.
If possible, include:
- Co-debtor, co-maker, or surety
- Security (chattel/real estate mortgage)

14.2. During the Life of the Contract

Always issue receipts for payments.
Keep an updated accounting (principal, interest, penalties).
Preserve all messages or emails that acknowledge the debt.

14.3. When Debtor Starts Defaulting

Don’t wait endlessly; send a formal demand.
Be open to reasonable settlement if it ensures actual recovery.
If necessary, consult a lawyer early to avoid prescription and procedural missteps.

15. When You Should Strongly Consider Getting a Lawyer

Although small claims allow self-representation, it is often wise to consult a lawyer if:

The amount involved is substantial or complex.
There are issues of forged signatures, mental capacity, or undue influence.
The debtor is a corporation or business with multiple contracts.
You expect defenses like:
- “I already paid.”
- “The contract is void.”
- “The interest is unconscionable.”
- “I never received the money.”

A lawyer can help:

Evaluate whether your evidence is sufficient
Choose the proper court and procedure
Draft strong pleadings and represent you in hearings
Strategize not just about winning the case, but actually collecting on the judgment

Summary

To sue for breach of a signed payment agreement in the Philippines:

Confirm the breach and gather your documents.
Send a proper demand letter and keep proof of receipt.
Determine whether barangay conciliation is required.
Choose the right type of case (small claims or regular civil action), court, and venue.
File a Complaint or Statement of Claim, attaching the signed agreement and other proof.
Go through pre-trial and, if necessary, trial to obtain judgment.
If you win, pursue execution to actually collect what is due.

If you’d like, you can share a redacted version of your payment agreement (removing names and other sensitive details), and I can help walk through how a Philippine court might look at it and how your potential claims (principal, interest, penalties) might be analyzed.