Construction Contract (Philippines)
CONSTRUCTION CONTRACT
Civil Code of the Philippines (RA 386) | Contractors' License Law (RA 4566) | National Building Code (PD 1096) | EO 1008 (CIAC)
This Construction Contract ("Contract") is entered into as of [Date of Contract]
BETWEEN:
(1) [Owner Name], with address at [Owner Address] ("Owner"); AND
(2) [Contractor Name], with address at [Contractor Address], holding PCAB License No. [PCAB License Number] ("Contractor").
1. SCOPE OF WORK
1.1 The Contractor shall perform all works necessary for the construction of: [Project Description]
1.2 Location: [Project Location]
1.3 Building Permit No.: [Building Permit Number]. The Owner shall obtain the Building Permit from the Office of the Building Official (OBO) before construction commences, as required under National Building Code (PD 1096) Section 301.
1.4 The Contractor shall comply with all requirements of the National Building Code (PD 1096), Fire Code (RA 9514), DOLE Occupational Safety and Health Standards (DO 198-18), and the Labor Code (PD 442).
2. TIMELINE
2.1 The Contractor shall commence work on [Commencement Date] and complete all works by [Completion Date].
2.2 The Contractor shall be liable for liquidated damages of [Liquidated Damages] for each calendar day of delay in completion beyond [Completion Date], unless the delay is caused by Owner-directed changes, Force Majeure, or other excusable events.
3. CONTRACT PRICE AND PAYMENT
3.1 Contract Price: [Contract Price] (exclusive of VAT at 12% under NIRC Section 108).
3.2 Mobilization Advance: [Mobilization Advance] of the Contract Price, payable upon contract signing against a recoupment schedule.
3.3 Progress Payments: Monthly progress billings based on percentage completion certified by the Owner's representative. Retention of [Retention Rate] shall be withheld from each progress payment until the end of the Defects Liability Period.
3.4 The Owner shall withhold creditable withholding tax at 2% under BIR Revenue Regulation No. 11-2018 on each progress payment.
4. DEFECTS LIABILITY
4.1 The Contractor shall maintain a Defects Liability Period of one (1) year from the date of practical completion. During this period, the Contractor shall rectify all defects at no additional cost to the Owner.
4.2 For structural defects in buildings, the Contractor and supervising engineer/architect are liable for fifteen (15) years from completion under Civil Code Article 1723.
5. DISPUTE RESOLUTION
5.1 All disputes arising out of or in connection with this Contract shall be submitted to the Construction Industry Arbitration Commission (CIAC) for arbitration under Executive Order No. 1008 (1985). CIAC awards shall be final and executory.
Owner
________________
Signature
Contractor
________________
Signature
What Is a Construction Contract (Philippines)?
A Construction Contract in the Philippines defines what each party must do under the deal and the consequences of failing to perform.
Construction contracts in the Philippines are subject to a thorough regulatory framework. The Contractors' License Law (Republic Act No. 4566, 1965) and its Implementing Rules require all contractors performing construction work to hold a valid license issued by the Philippine Contractors Accreditation Board (PCAB) under the Construction Industry Authority of the Philippines (CIAP). Engaging an unlicensed contractor is unlawful under RA 4566, and the Supreme Court in Uy v. Lacsamana has held that contracts with unlicensed contractors may be unenforceable.
The National Building Code of the Philippines (Presidential Decree No. 1096, 1977) and its Implementing Rules administered by the Department of Public Works and Highways (DPWH) establish minimum standards for building design, construction materials, and structural safety. Building permits issued by the Office of the Building Official (OBO) of the relevant Local Government Unit (LGU) are mandatory before construction begins under National Building Code Section 301. The Fire Code of the Philippines (RA 9514, 2008) requires Bureau of Fire Protection (BFP) approval for building plans.
For government construction projects, Republic Act No. 9184 (Government Procurement Reform Act) and the CIAP/PCAB Special License requirements govern contractor eligibility and contract terms. The Construction Industry Arbitration Commission (CIAC) under Executive Order No. 1008 (1985) has original and exclusive jurisdiction over construction disputes, with awards enforceable like judgments of the Regional Trial Court.
The legal framework governing the Construction Contract (Philippines) in Philippines draws on several key statutes and regulatory bodies. Under Philippine law, the Civil Code of the Philippines (Republic Act No. 386) governs contractual obligations. The Revised Corporation Code (Republic Act No. 11232) regulates corporate entities through the Securities and Exchange Commission (SEC). The Labor Code of the Philippines (Presidential Decree No. 442) and Department of Labor and Employment (DOLE) govern employment matters. The Data Privacy Act of 2012 (Republic Act No. 10173) and the National Privacy Commission (NPC) protect personal data. The Bureau of Internal Revenue (BIR) administers tax obligations under the National Internal Revenue Code. Parties executing a Construction Contract (Philippines) in Philippines should confirm the document reflects current law, including any amendments enacted since the original drafting date. The Revised Corporation Code (RA 11232, 2019) sets the foundational requirements.
When Do You Need a Construction Contract (Philippines)?
A Construction Contract in the Philippines is required whenever a property owner engages a contractor to build, renovate, or carry out significant construction works.
A Construction Contract is needed when a Philippine property owner engages a PCAB-licensed contractor to construct a residential house, commercial building, or condominium unit, because the Contractors' License Law (RA 4566) requires licensed contractors and National Building Code (PD 1096) compliance, and the contract must document the scope, timeline, and payment terms.
A Construction Contract is required for all government construction projects, because the Government Procurement Reform Act (RA 9184) mandates a formal contract between the government entity and the winning bidder, with PhilGEPS posting of the award and contract.
A Construction Contract is needed when the project involves phased construction with progress billings, because the payment mechanism — typically based on percentage completion certified by the Project Engineer — must be contractually defined to avoid disputes over payment timing under Civil Code Article 1169.
A Construction Contract is required when subcontracting portions of the work, because the general contractor's obligations to the owner — including responsibility for the subcontractor's work under Civil Code Article 1717 — must be clearly maintained in the main contract.
A Construction Contract is needed when securing a performance bond or surety bond from a BSP-accredited surety company, as most Philippine construction contracts for significant projects require the contractor to post a performance bond equal to a percentage of the contract price to guarantee completion.
Parties in Philippines should prepare a Construction Contract (Philippines) proactively rather than waiting for a dispute to arise. Courts interpret agreements based on the written terms rather than oral representations. Under Philippine law, the Civil Code of the Philippines (Republic Act No. 386) governs contractual obligations. The Revised Corporation Code (Republic Act No. 11232) regulates corporate entities through the Securities and Exchange Commission (SEC). The Labor Code of the Philippines (Presidential Decree No. 442) and Department of Labor and Employment (DOLE) govern employment matters. The Data Privacy Act of 2012 (Republic Act No. 10173) and the National Privacy Commission (NPC) protect personal data. The Bureau of Internal Revenue (BIR) administers tax obligations under the National Internal Revenue Code. Where the transaction involves regulated activities, prior approval from the relevant authority may be required before execution.
What to Include in Your Construction Contract (Philippines)
A valid Construction Contract in the Philippines must contain the following essential elements.
Parties and Contractor Licensing: Full names, addresses, and for the contractor, the PCAB License Number, classification, and validity period. The contract should warrant that the contractor holds a valid PCAB license under RA 4566. Engaging an unlicensed contractor may expose the owner to liability and affect insurance coverage.
Scope of Work and Plans: A precise description of the work to be performed, by reference to approved architectural and engineering plans, Bill of Quantities (BOQ), and technical specifications prepared by a licensed architect (RA 9266, Architecture Act) or licensed civil engineer (RA 544, Civil Engineering Act). Building permit details should be referenced.
Contract Price and Payment Terms: The total contract price in Philippine Peso (PHP), the payment schedule (lump sum, unit price, or progress billing), retention money provisions (typically 10% withheld until project completion and defects liability period), and mobilization advance (typically 15% of contract price). VAT at 12% under NIRC Section 108 applies to construction services.
Project Timeline and Completion: Start date, completion date, milestones for partial completion, and provisions for extension of time due to force majeure, inclement weather, or owner-caused delays. Liquidated damages for delay under Civil Code Article 2226 are standard in Philippine construction contracts.
Variations and Change Orders: The procedure for issuing, approving, and pricing variations or change orders, and the limit on variations that can be ordered without renegotiating the contract price.
Defects Liability Period: A warranty period after practical completion (typically one year) during which the contractor must rectify defects at no cost. Under Civil Code Article 1723, engineers and architects responsible for defective structures face liability for 15 years after completion.
Insurance and Safety: Requirements for the contractor to maintain Contractors' All Risk (CAR) insurance, Third Party Liability (TPL) insurance, and compliance with DOLE Department Order No. 198-18 (Occupational Safety and Health Standards in the Construction Industry) and the Labor Code on workers' welfare.
Dispute Resolution: Submission of construction disputes to the Construction Industry Arbitration Commission (CIAC) under EO 1008 before court litigation, as required for CIAC-covered contracts.
Additional compliance elements for a Construction Contract (Philippines) used in Philippines include: Under Philippine law, the Civil Code of the Philippines (Republic Act No. 386) governs contractual obligations. The Revised Corporation Code (Republic Act No. 11232) regulates corporate entities through the Securities and Exchange Commission (SEC). The Labor Code of the Philippines (Presidential Decree No. 442) and Department of Labor and Employment (DOLE) govern employment matters. The Data Privacy Act of 2012 (Republic Act No. 10173) and the National Privacy Commission (NPC) protect personal data. The Bureau of Internal Revenue (BIR) administers tax obligations under the National Internal Revenue Code. Forms-legal.com provides this template as a starting point for Philippines-compliant documentation.
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Reference this free template in an article, syllabus, or research note:
Forms Legal. (2026). Construction Contract (Philippines) (Philippines) [Legal document template]. Forms Legal. https://forms-legal.com/philippines/business/services/construction-contract-philippines
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title = {Construction Contract (Philippines) (Philippines)},
year = {2026},
howpublished = {\url{https://forms-legal.com/philippines/business/services/construction-contract-philippines}},
note = {Free legal document template. Based on Revised Corporation Code (RA 11232, 2019)}
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Frequently Asked Questions
Yes. All contractors performing construction work in the Philippines must hold a valid license issued by the Philippine Contractors Accreditation Board (PCAB) under the Contractors' License Law (Republic Act No. 4566, 1965). PCAB licenses are classified by specialty and financial capacity into categories ranging from AAA (largest projects) to Small B (projects up to PHP 7,000,000). A contractor without a PCAB license may not lawfully perform construction work, and engaging an unlicensed contractor may render the construction contract unenforceable under RA 4566. For government construction contracts, PCAB accreditation is a mandatory eligibility requirement under the Government Procurement Reform Act (RA 9184) and its Implementing Rules. PCAB licenses must be renewed annually, and the CIAP maintains a public registry of licensed contractors at ciap.dti.gov.ph.
The Construction Industry Arbitration Commission (CIAC) is a quasi-judicial body created under Executive Order No. 1008 (1985) under the Construction Industry Authority of the Philippines (CIAP) with original and exclusive jurisdiction over construction disputes in the Philippines. CIAC has jurisdiction over disputes arising from or connected with construction contracts — including government and private sector projects — where at least one party is engaged in construction as a contractor, developer, owner, or project manager. CIAC arbitration is mandatory for construction disputes once the arbitration clause is in the contract. CIAC awards are final, executory, and enforceable by the Regional Trial Court as judgments. The Supreme Court in Megaworld Globus Asia Inc. v. DSM Construction held that the CIAC clause in a construction contract gives CIAC exclusive jurisdiction over the dispute regardless of the parties' subsequent resort to court. CIAC arbitration is generally faster and more cost-effective than court litigation for technical construction disputes.
Under a Philippine Construction Contract, the owner's primary obligation is to pay the contract price in accordance with the agreed payment schedule. Progress payments are typically tied to completion percentages certified by the Project Engineer or Owner's Representative, and the contract must specify the certification procedure, the period for payment after certification (commonly 14 to 30 days), and the consequence of late payment. Civil Code Article 1169 provides that the owner is in delay if payment is not made within the agreed period after demand. Retention money — commonly 10% of each progress payment — is withheld until the defects liability period expires or a retention bond is substituted. The owner must also cooperate in obtaining building permits, provide site access, and make timely decisions on variations to avoid owner-caused delays that could entitle the contractor to an extension of time and additional compensation under the contract.
A Philippine contractor's liability for construction defects is governed by both the contract and the Civil Code. Contractual defects liability periods (DLP) — typically 6 months to 1 year after practical completion — require the contractor to remedy defects discovered during the DLP at no additional cost. Beyond the contractual DLP, Civil Code Article 1723 imposes a 15-year liability period on engineers and architects for the collapse or ruin of a building due to defects in construction or the plans. This 15-year liability under Article 1723 cannot be waived by contract and runs from the time the building is completed. For hidden structural defects discovered after the DLP but before 15 years from completion, the owner may sue the contractor and the supervising engineer or architect under Civil Code Article 1723. The prescriptive period for actions under Article 1723 is 10 years from the time the cause of action accrues under Civil Code Article 1144.
Construction services in the Philippines are subject to VAT at 12% under NIRC Section 108 on the gross receipts of the contractor (contract price including materials and labor). The property owner must withhold creditable withholding tax (CWT) at 2% on payments to corporate contractors and at 5% on the first PHP 3,000,000 of income or 10% above that threshold for individual contractors under Revenue Regulation No. 11-2018. For government construction contracts, the Government of the Philippines withholds expanded withholding tax at applicable rates before releasing progress payments. Retention money released to the contractor upon project completion is also subject to withholding tax. Contractors must issue official receipts (OR) or sales invoices for each progress billing under BIR regulations, and must register their books of accounts with the Bureau of Internal Revenue (BIR).
This template is provided for informational purposes only and does not constitute legal advice. Laws vary by jurisdiction and change over time. Consult a qualified attorney for advice specific to your situation.Full disclaimer
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