Short answer. Under Article 1714 of the Civil Code, when a contractor produces work from materials he furnishes himself, he owns it until he delivers the finished thing to you and transfers dominion. That transfer, and the payment involved, are governed by the same rules that apply to warranty of title, hidden defects, and price in an ordinary sale.
What the law says
If the contractor agrees to produce the work from material furnished by him, he shall deliver the thing produced to the employer and transfer dominion over the thing.
Civil Code, Article 1714 — Work With Materials Furnished by Contractor. Read the full provision →
Ownership until delivery and transfer
Article 1714 provides that where the contractor agrees to produce the work from material furnished by him, he shall deliver the thing produced to the employer and transfer dominion over the thing. Because the materials belong to the contractor throughout construction or production, the thing being built or made is his until two things happen: delivery to you, and the transfer of dominion — legal ownership — over it. Before that point, you do not yet own the finished work.
Why this differs from work using the owner's own materials
This article specifically addresses the case where the contractor furnishes the material himself, which is why ownership questions arise at all — if you had supplied the materials, they would already be yours, and the finished product built from them would generally remain yours as it takes shape. Supplying the materials is what puts the contractor in an ownership position he has to formally transfer to you once the job is done.
Sale-like rules govern the transfer
The article states this contract shall be governed by the following articles as well as by the pertinent provisions on warranty of title and against hidden defects and the payment of price in a contract of sale. That means the contractor's obligation to hand over a work free of undisclosed title problems, and free of hidden defects, tracks the warranties a seller owes a buyer, and payment of the price follows sale-like rules as well.
What this means for your contract
If you are paying in installments as work progresses, or holding final payment until completion, understand that ownership legally passes at delivery and transfer, not simply because money has changed hands or work is underway. Review your contract for how it defines delivery and payment timing, and consult a lawyer if a dispute arises over when ownership actually passed or what condition the delivered work should have been in.
Cases citing this provision
These Supreme Court decisions cite the provision above. We list them so you can read them yourself; the summaries of what each decided are not ours to give.
- Robert San Pedro vs. Willy Ong & Norma Caballes, G.R. No. 177598, October 17, 2008 — read the decision on LawPhil →
- Commissioner of Internal Revenue vs. Court of Appeals, et al, G.R. No. 115349, April 18, 1997 — read the decision on LawPhil →
- Engineering & Machinery Corp. vs. Court of Appeals, et al, G.R. No. 52267, January 24, 1996 — read the decision on LawPhil →