Below is a comprehensive discussion of debt recovery in the Philippines when no written contract exists. Although having a written agreement is generally advisable, Philippine law does recognize and allow enforcement of certain obligations even in the absence of a formal document. This article aims to cover the legal basis for such claims, evidentiary requirements, procedural steps for collection, and practical tips.

1. Legal Basis for Debt Recovery Without a Written Contract

1.1. Oral Contracts Are Generally Enforceable

Under Philippine law, an obligation does not always have to be in writing to be valid or enforceable. The Civil Code of the Philippines recognizes both oral and written contracts. Specifically, Article 1356 of the Civil Code provides that contracts shall be obligatory in whatever form they may have been entered into, provided all the essential requisites for their validity are present (i.e., consent, object, and cause).

Therefore, an oral agreement to lend or borrow money can be binding between the parties. The main challenge lies in proving the existence of that agreement if a dispute arises.

1.2. Other Sources of Obligation

Even where a strict “contract” might be questioned, the Civil Code allows claims based on other sources of obligation, such as quasi-contract. Two relevant concepts are:

Negotiorum gestio (Articles 2144-2175): Arises when someone voluntarily takes charge of another’s abandoned business or property without the latter’s authority.
Solutio indebiti (Articles 2154-2163): Occurs when something is received erroneously and the recipient is obliged to return it.

These may sometimes be invoked when money was given or services were performed and the question arises whether there was consent or a meeting of minds on repayment.

2. Evidentiary Concerns

2.1. Burden of Proof

The creditor (the person claiming the debt) bears the burden of proving:

That money was lent or an obligation was incurred by the debtor.
That the debtor agreed to repay the amount or that an obligation to pay arises from other legal sources.

2.2. Types of Acceptable Evidence

In the absence of a written contract (e.g., a promissory note), other forms of evidence become crucial:

Witness Testimonies: Testimony from disinterested parties who witnessed the transaction or partial repayment can be valuable.
Receipts or Other Documentary Evidence: Even informal records (e.g., notes, text messages, emails, bank deposit slips, or acknowledgment receipts) can be used to corroborate the claim that money was lent and was intended to be repaid.
Admissions by the Debtor: Any admission through text, social media messages, or even verbal admissions made in front of a credible witness can strengthen the claim.
Partial Payments: If the debtor partially paid or recognized an outstanding balance in any way, this constitutes strong evidence of the obligation.

2.3. Best Evidence Rule and Secondary Evidence

In some instances, if there was any written note or electronic communication evidencing the debt that has been lost or destroyed, the courts may allow secondary evidence. Affidavits, oral testimonies, or duplicates might be admitted if the original document is proven to have been lost or is otherwise unavailable without fault of the claimant.

3. Prescription (Statute of Limitations)

3.1. Prescriptive Period for Oral Contracts

Article 1145 of the Civil Code provides that actions based on an oral contract prescribe in six (6) years from the time the right of action accrues. This means the creditor must file a case within six years of the date the debtor was supposed to pay.

3.2. Interrupting Prescription

Under Article 1155 of the Civil Code, any written extrajudicial demand (e.g., a formal demand letter) or a judicial action (e.g., filing a complaint in court) interrupts the running of the prescriptive period. Once interrupted, the clock resets, and a new prescriptive period begins.

4. Steps to Recover Debt Without a Written Contract

4.1. Demand for Payment

A formal demand letter is strongly recommended. While not strictly required, it serves two main purposes:

Informs the debtor of the obligation to pay and sets a deadline.
Interrups prescription and provides additional evidence in court to prove that the debtor was reminded of their obligation.

4.2. Attempt an Amicable Settlement

Before resorting to legal remedies, it is often advisable to try settling the matter out of court. Mediation or barangay conciliation (if the parties live in the same city or municipality) may be required under the Katarungang Pambarangay Law (Local Government Code) for disputes involving sums below a certain threshold. If a settlement is reached, it is best to reduce it to writing.

4.3. Small Claims Procedure

If the amount claimed does not exceed PHP 400,000 (for Metropolitan Trial Courts and other first-level courts, as adjusted by Supreme Court issuances), you may file a Small Claims Case under the Rules on Small Claims. Key points of small claims:

Lawyers are not allowed to appear on behalf of the parties (except as the party-litigant).
The procedure is streamlined and designed for speedy resolution.
The plaintiff (creditor) must present evidence such as any written demands, text messages, or witness affidavits showing the existence of the debt.

4.4. Regular Court Action (Civil Case for Sum of Money)

If the claim exceeds the small claims threshold, or there are more complex issues, you may file a regular civil action in the appropriate court. Steps include:

Filing the Complaint: Indicate the cause of action, the amount owed, and the basis for the claim (e.g., oral contract, partial payments, admissions).
Service of Summons: The court issues a summons to the defendant (debtor).
Submission of Evidence: The parties exchange and present evidence to support or refute the debt.
Trial and Judgment: The court will evaluate the evidence and issue a judgment. If the creditor prevails, the court orders the debtor to pay.

4.5. Execution of Judgment

If the debtor does not comply with the court’s decision, the creditor may move for the writ of execution, allowing court officers to levy or garnish the debtor’s assets to satisfy the judgment.

5. Practical Tips and Considerations

Gather and Preserve Evidence
- Keep screenshots of chat messages, emails, and any electronic communication that can prove the loan or acknowledgment of debt.
- Save transaction records such as deposit slips or electronic fund transfers.
Send a Demand Letter
- Highlight the date, amount owed, and due date for payment.
- Clearly state that non-payment will lead to legal action.
Consider the Amount Involved
- For smaller debts (up to PHP 400,000), use the small claims process for a faster resolution.
- For larger amounts, be prepared for a formal court litigation which can take longer.
Observe Prescriptive Periods
- Act promptly and, if possible, interrupt prescription by sending a written demand or filing a case if there are signs of non-payment.
Alternative Dispute Resolution
- Explore mediation or barangay conciliation, which can be cost-effective and quicker than court proceedings.
Maintain Good Recordkeeping Habits
- Although you currently have no written contract, try to create some written trail for any future transaction. This can be as simple as sending a message or email confirming the terms of the loan.
Legal Counsel
- While small claims courts prohibit representation by lawyers for the claim itself, consulting a lawyer beforehand can help prepare a strong case or frame an effective demand letter.

6. Conclusion

Recovering a debt in the Philippines without a written contract is undoubtedly more challenging, but it remains legally feasible. Philippine law recognizes and upholds oral contracts and obligations founded on other legal grounds, provided they can be proven through witness testimony, documentation, admissions, or partial payments. Creditors must pay close attention to evidentiary requirements and prescriptive periods, and make use of available legal mechanisms such as demand letters, small claims courts, or formal civil actions as needed.

In all cases, maintaining proper documentation—even post-fact—can significantly bolster the chance of successful debt recovery. Seeking professional legal advice, when in doubt, can further ensure that the creditor’s rights are adequately protected and enforced.