Short answer. Either or both. Article 1713 defines a contract for a piece of work as one where the contractor executes the work in exchange for a certain price or compensation. The statute uses both terms interchangeably, leaving the parties free to agree on whatever payment structure suits the project.
What the law says
By the contract for a piece of work the contractor binds himself to execute a piece of work for the employer, in consideration of a certain price or compensation. The contractor may either employ only his labor or skill, or also furnish the material.
Civil Code, Article 1713 — Contract for a Piece of Work Defined. Read the full provision →
What defines a contract for a piece of work
Article 1713 sets out the basic definition: the contractor agrees to execute a specific piece of work for the employer, and the employer pays a certain price or compensation in return. What distinguishes this contract from employment is that the focus is on the result — the completed work — rather than on the ongoing services of the worker. The contractor controls how the work is done and delivers an output. This is sometimes called a contract of service or independent contractor agreement, depending on the context, but the Civil Code calls it a contract for a piece of work.
Price or compensation — what the terms mean
The statute uses both "price" and "compensation" to signal flexibility in how payment is structured. A price typically suggests a fixed or lump-sum amount agreed in advance — the classic "fixed-price contract" where the employer knows the total cost from the start. Compensation is broader and may cover cost-plus arrangements, hourly billing, or fee structures tied to milestones or the value of materials used. The key requirement is that the amount be certain — not necessarily fixed to a single number, but determinable from the terms of the contract without needing a new agreement.
Whether the contractor supplies materials matters
Article 1713 explicitly addresses the material question: the contractor may use only labor or skill, or may also furnish materials. This matters because it affects the economic character of the deal and the risk each party carries. When the contractor furnishes materials, they absorb the cost risk of price fluctuations and supply problems. When the employer supplies materials, the contractor's obligation is essentially the labor and expertise applied to what they are given. Both structures are valid, and the parties should specify in the contract who is responsible for what to avoid disputes later.
Why the payment structure should be clearly documented
Disputes over payment in piece-of-work contracts frequently arise from ambiguity about what was agreed. The statute says the price or compensation must be certain, but parties often rely on oral understandings or vague written terms that become contested when the work is complete. A well-drafted contract should specify the total amount or the formula for computing it, the payment schedule or trigger events, what happens when additional work is required beyond the original scope, and who pays if materials cost more than expected. Getting these terms in writing before the work starts is far simpler than reconstructing them after a dispute.
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.
- Engineering & Machinery Corp. vs. Court of Appeals, et al, G.R. No. 52267, January 24, 1996 — 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 →