Dear Attorney,

I am writing as a startup business owner engaged in printing services. My business is not yet registered with the Department of Trade and Industry (DTI) nor with the Bureau of Internal Revenue (BIR). Despite this, I began operations about a month ago and accepted a large order from an organization through a direct client—one of their members. The total order reached a considerable sum. However, once the other members of the organization discovered that I was the one who actually provided the printing services, they claimed that our agreement was “illegal” because my business is not yet formally registered.

At present, they are offering to pay only for my expenses and my labor hours, despite the fact that I delivered 50,000 pieces of printed materials, many of which were rush orders. They insist that I should accept their terms, effectively preventing me from collecting the originally agreed-upon amount. They argue that I have no right to enforce the payment of the total price, allegedly because my unregistered status makes the transaction void. Meanwhile, I understood that their organization had already decided to engage an external printer for their tickets and that my direct client had every right to commission me, albeit she did not inform all the members that I would be handling the job.

I seek your professional guidance on whether I have the right to demand the payment we agreed upon, even though my business is not fully formalized. Additionally, I wish to know whether there is any legal basis for me to resist their demand that I merely accept “labor plus expenses.” Any insight you can provide regarding this matter—particularly about the enforceability of such a contract and the liabilities that might arise from my current unregistered status—would be greatly appreciated.

Thank you in advance for your time and expertise.

Respectfully,
A Concerned Startup Printing Service Provider

3. LEGAL ARTICLE ON THE MATTER
As the best lawyer in the Philippines, it is important to analyze this situation meticulously, taking into account the complex interplay of obligations and contracts under Philippine law, taxation and business registration requirements, and potential liabilities. The question at hand involves a printing startup owner, operating without formal DTI and BIR registration, who delivered printed materials to an organization. The organization now questions the validity of the arrangement and seeks to pay only a fraction of the agreed-upon price. This article provides an in-depth look at the relevant legal principles, identifying remedies and preventive strategies.

I. INTRODUCTION TO RELEVANT LEGAL FRAMEWORK

A. Civil Code of the Philippines (Obligations and Contracts)
The Civil Code is the primary legal framework governing private contracts in the Philippines. Under Article 1159 of the Civil Code, obligations arising from contracts have the force of law between the contracting parties and must be complied with in good faith. This principle generally applies regardless of whether one party is a duly registered business or not.

B. Registration Requirements for a Business

DTI Registration (for Sole Proprietorships)
- Sole proprietors are required to register their business name with the DTI to ensure exclusive use of the chosen trade name within a particular scope (national, regional, or city-wide).
- The absence of such registration does not automatically render a commercial contract unenforceable, but it can expose a business to administrative penalties.
BIR Registration
- Businesses must register with the BIR for the purpose of securing official receipts, paying taxes (income tax, percentage tax or value-added tax), and ensuring compliance with national tax laws.
- Operating without BIR registration can lead to penalties, including surcharges, interest, and in extreme cases, potential criminal liability for tax evasion if taxes are willfully not paid.

C. Local Business Permits
In addition to DTI and BIR registrations, local government units (LGUs) typically require business permits or mayor’s permits. Engaging in commercial activity without a proper business permit may subject an entrepreneur to local penalties or closure orders from the LGU. Yet, similar to DTI or BIR non-registration, this does not necessarily void contractual obligations.

D. Illegality of Contracts vs. Regulatory Non-Compliance
A key point of confusion in cases like this is the distinction between a contract being “illegal” or “void” versus non-compliance with regulatory requirements. For a contract to be considered void, it must have an illicit cause or object (Article 1409, Civil Code). Merely failing to register with DTI or BIR is typically an administrative or regulatory violation rather than an illegal cause that would void an otherwise valid agreement. The Supreme Court has, in a number of decisions, upheld the enforceability of transactions even when one of the parties was not registered, provided the subject matter of the agreement was neither contrary to law, morals, good customs, public order, nor public policy.

II. ENFORCEABILITY OF THE PRINTING AGREEMENT

A. Existence and Validity of the Contract

Essential Requisites
- Consent: There appears to be consent between your direct client and you to produce 50,000 pieces of tickets for a specific price. The only question is whether the organization as a whole can repudiate the contract because the other members allegedly did not know you were the printer. However, the direct client’s authority to transact on behalf of the organization becomes crucial here.
- Object: The object of the contract (the printed tickets) is lawful.
- Cause or Consideration: The cause is the price, presumably in exchange for the services and printed output you provided.
Capacity to Contract
- While you are not DTI-registered, you are presumably of legal age and with full capacity to enter into contracts. DTI or BIR registration is not the measure of a person’s capacity to contract; it is instead a requirement for lawful business operation.
Form of the Contract
- A contract need not be in writing to be valid. The agreement can be oral or implied, so long as the essential elements are present. However, for evidentiary purposes, a written contract is more secure.

B. Right to Demand Payment
Given that the elements of a valid contract appear to exist, you generally retain the right to demand the consideration promised to you. Regulatory non-compliance (i.e., not being registered with DTI or BIR at the time of contracting) does not inherently invalidate the contract. Hence, the organization may not unilaterally alter the terms and decide to pay a reduced amount unless there is a legal basis under the contract or law.

C. Quantum Meruit Doctrine
If for some reason the contract were found unenforceable due to lack of authority of the direct client or some other factor (but not necessarily because of your unregistered status), you may still recover at least the reasonable value of the goods or services rendered under the principle of quantum meruit. This principle prevents unjust enrichment of the party who received the benefit without fair compensation.

III. CONSEQUENCES OF OPERATING WITHOUT DTI OR BIR REGISTRATION

A. Administrative Penalties

DTI Violation: Running a business without registering with DTI could lead to administrative sanctions, including fines.
BIR Non-Registration: Failure to register results in penalties such as late registration fees, surcharges, interest, and potentially more serious repercussions if one deliberately avoids tax payments.

B. Tax Liabilities
Even if you have not yet officially registered, you remain legally obligated to declare your income and pay the corresponding taxes. The BIR can assess deficiency taxes, including penalties, if it finds that you have not complied with registration requirements and tax reporting.

C. Risk of Criminal Liability
In extreme cases—usually requiring willful, deliberate acts of tax evasion—unregistered businesses might be exposed to criminal charges. However, mere late registration or oversight usually leads to administrative fines and penalties instead of direct criminal prosecution, assuming you promptly rectify the situation.

D. Local Government Permit Issues
Operating without a mayor’s permit or similar local license can also result in fines, or in serious cases, an order to cease operations. While this is inconvenient, it generally does not nullify your existing contracts or extinguish your right to be paid.

IV. ANALYSIS OF THE ORGANIZATION’S DEMAND

A. Alleged Illegality of the Transaction
The organization’s argument centers on your unregistered status and the claim that certain members did not consent to having you fulfill the order. However, to void a contract under Philippine law, an “illicit cause or object” must be present, or it must be contrary to laws, morals, good customs, public order, or public policy. Being unregistered does not necessarily meet this standard of illegality.

B. Undisclosed Principal Theory and Agency
There is a potential issue of agency if your direct client was not explicitly authorized by the entire organization to engage your services. Yet, if the organization initially sanctioned the creation of tickets by “someone else” because they could not do it themselves, and your direct client took on the role of finding that someone, it is arguable that she was clothed with at least apparent authority to act. This is especially so if your finished products were delivered to and accepted or used by the organization at any point.

C. Payment of Expenses and Labor Only
Offering to pay only for expenses and labor deviates from the original deal. Unless the contract specifically stated that only actual costs plus labor would be reimbursed, the organization’s attempt to reduce the agreed price could be seen as a unilateral modification of the contract. Such a unilateral change is not valid without your consent. If your direct client or the organization tries to retroactively change the contract, they could be in breach of the original agreement.

D. Breach of Contract Implications
Should the organization refuse to pay the previously agreed-upon amount, you may consider legal action for collection of a sum of money (i.e., an action for specific performance) and/or damages. Under the Civil Code, the injured party in a breach of contract case may recover actual damages (covering the monetary loss), as well as other forms of damages if warranted.

V. POSSIBLE COURSES OF ACTION

A. Communicate and Negotiate

Emphasize the Original Agreement: You may politely insist on the validity of your verbal agreement, highlight that the unregistered status does not automatically void the contract, and request adherence to the agreed terms.
Show Evidence of Delivery: Provide any documentation, proof of rush work, or receipts for materials used to demonstrate that you fulfilled your part of the bargain.

B. Propose a Compromise
If the organization remains unwilling to pay the entire sum, you could offer a settlement—perhaps a slightly discounted final price—on the condition of prompt and full payment. This approach sometimes resolves disputes amicably without resorting to litigation.

C. Consider Formal Legal Remedies

Small Claims Court or Regular Court Action: Depending on the total amount in dispute, you might file a Small Claims case if it fits the jurisdictional threshold (currently up to a certain amount set by the Supreme Court for small claims). Otherwise, you can proceed to the regular courts for collection of sum of money.
Complaint for Unjust Enrichment or Action on Quasi-Contract: If the contract is disputed, you may still claim under quasi-contract principles that the organization should pay the fair value of your services.

D. Register Your Business Promptly
To avoid future disputes or complications, you should proceed with DTI and BIR registration as soon as possible. Doing so will place you in full compliance with the law and allow you to issue official receipts, maintain proper records, and protect your legal interests more effectively.

VI. FREQUENTLY ASKED QUESTIONS ON UNREGISTERED BUSINESSES AND CONTRACTS

Can an unregistered business enforce a contract in court?
- Generally, yes. Philippine jurisprudence recognizes that unregistered status does not automatically strip a party of the right to enforce an otherwise valid contract. Courts focus on the existence of the essential elements of a contract and the presence or absence of any defect or illegality.
Will I be criminally liable for doing business without registration?
- Not automatically. The typical consequence for operating an unregistered business is an administrative penalty, such as fines, surcharge, or payment of back taxes. Criminal charges usually arise only in cases of deliberate fraud or tax evasion.
Is there a maximum penalty for late DTI or BIR registration?
- The penalties vary and may include fixed fines plus increments depending on the length of delay and the taxes involved. It is advisable to check the latest BIR regulations and DTI guidelines for current rates.
If one member of an organization hires me, do I need the signature of all members?
- It depends on the organization’s rules and whether the contracting member has authority—actual, implied, or apparent—to bind the organization. If that member acted within the scope of her authority, the organization is generally bound.
What if the organization claims they never used the printed materials?
- If you can prove delivery, or if the printed materials were indeed utilized, then the organization may be obligated to pay. Even if they did not use the materials, you might still recover the value of the work performed if the refusal to accept the product is unjustified.

VII. DETAILED LEGAL RATIONALE UNDER PHILIPPINE LAW

A. Doctrine of Autonomy of Contracts
Article 1306 of the Civil Code enshrines the principle that parties may establish such stipulations, clauses, terms, and conditions as they may deem convenient, provided they are not contrary to law, morals, good customs, public order, or public policy. The essential question is whether there is anything in your arrangement that contravenes these limitations. Not being DTI-registered does not, in and of itself, violate these principles.

B. Breach and Remedies
If the organization refuses to pay the price stipulated, it effectively breaches the contractual obligation. Articles 1191, 2201, and 2209 of the Civil Code outline the creditor’s remedies in cases of breach, which include the right to demand specific performance (i.e., payment of the agreed amount) plus damages, if warranted.

C. Unjust Enrichment and Quasi-Contracts
Articles 2142 to 2144 of the Civil Code address situations in which one party is unjustly enriched at the expense of another. The law provides that if a person obtains something at the expense of another without just or legal ground, the aggrieved party is entitled to restitution. Even in the absence of a perfected contract, the principle of unjust enrichment ensures that you may recover at least the value of the services rendered.

D. Registration Laws vs. Contract Validity
Philippine courts usually consider violations of business registration laws as separate administrative or fiscal issues. They do not necessarily impugn the validity of the underlying commercial arrangement, unless the law explicitly states that the lack of registration nullifies the transaction (which is generally not the case under current Philippine statutes).

VIII. STRATEGIC RECOMMENDATIONS

Document All Communications
- Preserve text messages, emails, receipts, proofs of printing and delivery, or any other evidence showing that the organization’s representative ordered, received, or approved the job.
Seek an Amicable Resolution
- Before escalating the matter legally, it is often best to open a channel for dialogue. Remind them calmly, in writing, of the scope of work, the urgency under which you delivered, and the agreed price.
Demand Letter
- If the organization remains uncooperative, consider sending a formal demand letter, drafted or reviewed by counsel, specifying the amount due and the basis of your claim.
Legal Action
- Should negotiations fail, you have the legal right to pursue a collection suit. Always consult an attorney to assess the strength of your case, the jurisdiction, and potential legal costs.
Immediate Compliance with Registration Requirements
- To bolster your credibility and legal standing for future transactions, register promptly. This allows you to issue official receipts, engage in lawful commerce, and avoid any misunderstanding about the legitimacy of your operations.

IX. CONCLUSION

The crux of this scenario rests on the fundamental distinction between a regulatory requirement (registration with DTI and BIR) and the legitimacy of a private contract under the Civil Code. Failing to register a business subjects the owner to possible administrative and tax penalties, yet it does not inherently void a contract for printing services that contains the necessary elements of consent, object, and cause.

Accordingly, you are not stripped of your right to demand payment under the original agreement merely because you were not registered at the time you delivered the goods. The organization’s contention that the transaction is “illegal” typically does not hold water unless there is a specific law declaring unregistered transactions void or unless the arrangement itself is otherwise prohibited by law. Furthermore, the principle of unjust enrichment remains available as a remedial measure, ensuring that, at a minimum, you are entitled to fair compensation for the labor and materials expended.

Nevertheless, operating without the proper permits and registration leaves you vulnerable to administrative fines and increases the risk of tax penalties. The wisest path is to register your business expeditiously, fulfill your tax obligations, and, where necessary, consult a lawyer who can guide you on both compliance and contractual enforcement matters. If the organization persists in refusing to uphold its end of the bargain, you have legal remedies at your disposal, from negotiation to formal litigation.

In summary, you maintain the right to the payment originally agreed upon and do not need to accept their unilaterally imposed “labor plus expenses” offer, absent a valid contractual basis for that change. While you must also address your registration status with the DTI, BIR, and possibly local government units, your unregistered status does not necessarily negate your contractual rights. The interplay of these factors underscores the importance of seeking sound legal counsel, which will help you navigate both the administrative requirements and the enforcement of your rightful claim.

Disclaimer: This article provides general information on Philippine law and does not constitute formal legal advice. For specific applications of the law to your circumstances, it is recommended to consult a qualified attorney.