Contract Drafting for Delivery Platform Merchant and Rider Agreement (Philippine Context)
All information herein is provided for general educational and informational purposes only and does not constitute legal advice. For specific legal concerns, it is best to consult a qualified Philippine attorney.

1. Introduction

The rapid rise of on-demand delivery services in the Philippines—driven by the growing digital economy—has made online delivery platforms a key player in connecting merchants (restaurants, retailers, etc.) with consumers. Delivery riders, meanwhile, act as essential service providers who bridge the physical distance between merchants and customers. As the industry expands, it is important that delivery platforms, merchants, and riders establish clear, legally compliant, and well-structured agreements.

This article explores the essential elements in drafting a Delivery Platform Merchant and Rider Agreement that takes into account Philippine laws, regulations, and best practices.

2. Philippine Legal Framework

A contract among a platform (often a technology company), a merchant (seller of goods or services), and a rider (delivery service provider) must align with various Philippine statutes and regulations, including:

Civil Code of the Philippines (Republic Act No. 386)
- Governs general principles of contracts, obligations, and liabilities.
- Outlines the requisites of a valid contract (consent, object, and cause).
Labor Code of the Philippines
- May apply if the rider is potentially classified as an employee rather than an independent contractor. Determining the nature of the working relationship is crucial (the “four-fold test”: power to hire, payment of wages, power to dismiss, and power to control conduct).
Electronic Commerce Act (Republic Act No. 8792)
- Governs electronic transactions and digital signatures, relevant to online agreements and e-contracting.
Data Privacy Act of 2012 (Republic Act No. 10173)
- Regulates the collection, storage, and handling of personal data. Relevant to customer, merchant, and rider data processed by the delivery platform.
Consumer Act of the Philippines (Republic Act No. 7394)
- Covers consumer rights, product liability, and warranties—important for merchants who must ensure the safety and quality of their products.
Local Government Regulations
- Some local government units (LGUs) may impose specific ordinances or guidelines for food delivery services, business permits, and safety compliance.
Intellectual Property Laws
- Trademarks, brand usage, and marketing materials used by merchants or the platform.

Understanding these overlapping legal frameworks helps drafters ensure the agreement remains robust and compliant.

3. Parties to the Agreement and Relationship

3.1 The Platform Operator

Typically operates the digital infrastructure (app or website).
Coordinates orders, payments, and overall service logistics.
Manages customer data, handles marketing, and provides customer support in many cases.

3.2 The Merchant

The individual or business entity offering products or services (e.g., restaurants, grocery stores, retail shops).
Responsible for ensuring the quality, safety, and legality of the goods.
Complies with pricing, packaging, and product labeling requirements.

3.3 The Rider

Handles physical delivery from the merchant to the customer.
Often classified as an independent contractor rather than an employee, but careful drafting is needed to ensure compliance with labor laws and to avoid misclassification.
May utilize personal vehicles or company-provided vehicles/equipment.

3.4 The End-Consumer (Customer)

Not a direct party to the Merchant-Rider-Platform contract, but retains certain rights as a consumer under the law.
Protected by consumer protection statutes, data privacy regulations, and any platform’s user terms.

4. Key Provisions in a Delivery Platform Merchant and Rider Agreement

A well-drafted contract should address the following major points:

Definitions
- Clearly define terms such as “Merchant,” “Rider,” “Platform,” “Customer,” “Delivery Services,” “Commission,” and “Service Fees.”
- Ensures uniform interpretation among all parties.
Scope of Services
- State explicitly the nature of the services: the Platform connects Merchants to Customers, and the Rider delivers goods.
- Detail the geographical areas covered, available time slots, and any service exclusions or limitations.
Merchant Obligations
- Compliance with Laws: Must ensure all licenses, permits, and necessary registrations (e.g., sanitary permits, LGU licenses) are up to date.
- Product Safety and Quality: Obligated to comply with health, safety, and labeling regulations, especially for food items.
- Pricing and Payment Terms: Must provide accurate product listings, comply with agreed commission structures, ensure transparency in pricing.
- Packaging and Handover: Outline packaging standards to maintain product integrity in transit, and set out protocols for pick-up by riders (e.g., designated pick-up counters).
Rider Obligations
- Independent Contractor Status: Clarify that the Rider is not an employee (subject to the Labor Code tests). The agreement should indicate the Rider has control over how deliveries are completed, within agreed service standards.
- Vehicle Maintenance and Operating Expenses: Rider is typically responsible for vehicle upkeep, fuel, and other related costs, unless otherwise specified.
- Delivery Timeliness and Safety: Must follow traffic rules, use required safety equipment, and deliver within platform-defined performance standards.
- Handling of Goods: If dealing with food or fragile items, the Rider must observe proper handling guidelines.
Compensation and Fees
- Merchant-Platform Relationship: Usually, the Platform charges a commission or service fee from the Merchant for using the platform.
- Rider’s Delivery Fee: Typically either a per-delivery rate, distance-based fee, or combination. Payment channels (e.g., bank transfers, e-wallets) should be specified.
- Payment Schedules: Set forth the frequency and method of settlements (weekly, monthly, etc.).
- Commission Structure and Deductions: If the platform deducts its share automatically, the agreement should state how, when, and under what conditions.
Liability and Indemnification
- Platform’s Limited Liability: Usually, the platform disclaims liability for product defects (merchant’s responsibility) or accidents during delivery (rider’s responsibility).
- Merchant’s Product Liability: Merchant is responsible for ensuring product safety and quality; indemnifies the platform for claims arising from defective products.
- Rider’s Liability: For damages, theft, losses, or accidents. If accidents occur during delivery, the rider’s insurance coverage (if any) becomes relevant.
- Indemnification Clauses: Typically, each party indemnifies the other for liabilities arising from breach of representations, negligence, or misconduct.
Data Privacy and Confidentiality
- Compliance with the Data Privacy Act: If the merchant or rider handles customer personal information, ensure that data is processed lawfully and securely.
- Confidential Information: The agreement should specify any proprietary information (e.g., platform’s trade secrets or merchant’s recipes) that must be kept confidential.
- Consent for Data Sharing: The platform typically obtains customer data for order fulfillment; all parties must adhere to data privacy standards and obtain necessary consents.
Intellectual Property Rights
- Branding and Marks: The platform often grants the merchant and rider a limited license to use the platform’s name or branding for promotional purposes. The merchant’s logo might be displayed on the app.
- Restrictions: Clarify that no party gains ownership rights over another’s trademarks, logos, or proprietary content by virtue of the agreement.
Term and Termination
- Effective Date and Renewal: The start date of the contract, along with automatic renewal or fixed terms, if applicable.
- Grounds for Termination: Breach of contract, violation of service standards, repeated complaints, fraudulent conduct, or other just causes.
- Post-Termination Effects: Returning confidential information, settling outstanding payments, removing branding, and disabling merchant accounts.
Dispute Resolution
- Negotiation and Mediation: Often stipulated to encourage informal resolution before litigation.
- Arbitration: Some contracts call for binding arbitration in a specified venue.
- Judicial Recourse: If arbitration is not chosen, specify the jurisdiction and venue (e.g., courts of Makati City).
Governing Law
- Philippine Law: Agreements generally designate Philippine law as the governing law.
- Severability Clause: If any provision is held invalid, the rest of the agreement remains in force.
Force Majeure
- Covers events like natural disasters, pandemics, or other unforeseeable circumstances beyond the parties’ control that delay or halt deliveries or platform operations.
Miscellaneous Provisions
- Entire Agreement: Clarifies that all prior or collateral communications are merged into the final contract.
- Non-Exclusivity: Parties may agree that merchants or riders can engage with other platforms simultaneously unless otherwise restricted.
- Notices: Set out how official communications or notices are served (email, courier, etc.).

5. Special Considerations

5.1 Classification of Riders (Independent Contractor vs. Employee)

One of the most critical legal issues in the Philippines for on-demand delivery services is the classification of riders. Misclassification can expose the platform to labor claims such as underpayment, non-payment of statutory benefits, or illegal dismissal. To reduce the risk of an “employer-employee” relationship, the contract should emphasize:

The rider’s control over how deliveries are completed (e.g., flexible schedules, freedom to accept or decline delivery requests, limited supervision).
The rider’s obligation to provide and maintain their own equipment and vehicle.
The rider’s compensation based on deliveries completed rather than a fixed salary.

However, even a well-drafted contract is not foolproof if actual practices reflect an employer-employee dynamic. Courts look at actual working conditions rather than contractual labels.

5.2 Consumer Protection

While the end-consumer is not a direct party, consumer law obligations may flow through the merchant and the platform. Transparency in pricing, refund policies, and customer support should be addressed:

Refunds and Returns: Outline the procedure if the customer receives damaged or incorrect items.
Delivery Disputes: Clarify how to handle disputes over delayed or lost deliveries.

5.3 Insurance and Risk Allocation

In practice, many platforms provide or require riders to maintain insurance coverage to protect against liabilities arising from vehicular accidents or damage to goods. The contract may specify:

Accident Coverage: Third-party liability for vehicle accidents.
Goods Insurance: Coverage if items are lost or damaged in transit.

5.4 Local Ordinances and Health Regulations

If the merchant deals with food, they must comply with local health ordinances, such as acquiring a sanitary permit or ensuring food packaging meets the standards. The contract should place the burden on the merchant to comply, with indemnification if the platform faces regulatory penalties due to the merchant’s non-compliance.

6. Best Practices in Drafting

Clarity and Simplicity: Use plain language where possible to ensure all parties understand their obligations.
Consistency: Define terms clearly and use them consistently throughout the agreement.
Modular Approach: Consider separate documents for Merchant and Rider, with cross-references. Or, if using a single multi-party agreement, ensure it is well-structured to avoid confusion.
Compliance Check: Regularly review the contract against new regulations or jurisprudence (e.g., new data privacy guidelines or labor rulings).
Electronic Execution: Under the Electronic Commerce Act, e-signatures and digital confirmations can be valid, subject to authenticity and reliability measures.

7. Conclusion

A Delivery Platform Merchant and Rider Agreement in the Philippines must carefully navigate civil law principles, labor considerations, data privacy mandates, consumer protection rules, and local regulations. Clarity in roles, obligations, and risk allocation is paramount to avoid disputes and regulatory pitfalls. By incorporating well-defined clauses on service scope, compensation, liability, and data privacy, parties can promote a smooth operational relationship that benefits merchants, riders, the platform—and ultimately, consumers.

When drafting or reviewing such agreements, consulting with legal counsel experienced in e-commerce, labor law, and consumer protection is advisable. This ensures that any unique operational requirements and emerging regulations are adequately addressed, maintaining legal compliance and protecting all parties’ interests in the fast-growing digital delivery landscape.