Query: What can you do if someone who owes you money based on a verbal agreement refuses to pay?

In the Philippines, many informal financial transactions occur based on verbal agreements. Despite the lack of written documentation, verbal agreements are legally binding and enforceable under Philippine law. If someone who owes you money based on a verbal agreement refuses to pay, there are several steps you can take to seek recourse.

1. Understanding Verbal Agreements

Under Article 1305 of the Civil Code of the Philippines, a contract is defined as a meeting of minds between two persons whereby one binds himself, with respect to the other, to give something or to render some service. This means that verbal agreements, as long as they meet the basic requirements of a contract (consent, object, and cause), are legally binding.

2. Gather Evidence

Even though the agreement was verbal, you can still gather evidence to support your claim. This evidence can include:

Witnesses: Any third party who was present during the agreement and can testify to its existence.
Communications: Any text messages, emails, or other forms of communication that reference the loan.
Bank Transactions: Records of the transfer of funds, if applicable.

3. Demand Letter

The first formal step in seeking repayment is to send a demand letter. This letter should:

Clearly state the amount owed.
Provide a timeline of the loan agreement and the due date.
Request payment within a specified period (e.g., 15 days).
Indicate the potential legal actions if the payment is not made.

4. Barangay Conciliation

Before proceeding to court, the Philippines mandates barangay conciliation for disputes between residents of the same city or municipality. This process involves:

Filing a complaint with the Barangay.
Attending mediation sessions where the Barangay Captain or a Lupon (conciliation panel) will mediate.
Reaching an amicable settlement if possible.

If conciliation fails, the Barangay will issue a Certification to File Action, allowing you to proceed to court.

5. Filing a Case in Court

If the debtor still refuses to pay, you may file a case in court. Depending on the amount involved, the appropriate court can be:

Small Claims Court: For amounts not exceeding PHP 1,000,000.
Regular Courts: For amounts exceeding the threshold.

In court, you will need to present your evidence and witnesses to prove the existence and terms of the verbal agreement.

6. Legal Representation

While it is possible to represent yourself, hiring a lawyer can significantly improve your chances of success, especially for higher amounts. A lawyer can help you navigate the legal system, prepare your case, and advocate on your behalf.

7. Enforcement of Judgment

If the court rules in your favor, the debtor will be legally obliged to pay the amount determined by the court. If the debtor still refuses to pay, you can seek enforcement through legal means such as garnishment of wages or seizure of assets.

Conclusion

While pursuing repayment for a verbal loan agreement can be challenging, it is not without recourse. By gathering evidence, attempting mediation, and, if necessary, filing a case in court, you can seek to enforce your verbal agreement and recover the owed amount. Legal processes are available to ensure that verbal agreements are respected and debts are repaid, providing a measure of protection even in informal financial transactions.