Materials Stolen or Missing at a Construction Site: How to Claim Against the Main Contractor

The first day: four steps

Fix two numbers first, how much you delivered and how much is left, then put the shortage in writing; a verbal mention on site counts for very little.

Step one is a physical count. Bring delivery receipts and acknowledgment records to the storage area, count item by item, and list the shortfall by description, specification and quantity. Take photos and video showing the location, the date and anyone from the contractor who is present. If the contractor's site engineer will sign your count sheet, good; if they refuse, note that they refused and when.

Step two is written notice to the main contractor the same day. State the delivery dates, who signed for the goods, where they were stored, when you found the shortage and the exact list. Ask them to preserve and produce guard logs, gate entry records, CCTV footage and the movement records of other subcontractors for the same period. CCTV systems overwrite footage on a cycle, so the request to preserve recordings must be in that first message.

Step three is to stop piling uninstalled materials on site, or to ask for a separate lockable storage area before the next delivery, so the loss does not grow while the claim is pending.

Step four is deciding whether to report to the police. If the value is significant or the theft looks organized, file a report and get the reference number, which both insurers and the contractor will ask for. See how to file a police report.

Assign one person on your side to own the incident from this point, so the contractor, the insurer and the police all hear the same facts from the same source.

Who pays: three things decide it

Liability depends on the contract, the delivery acknowledgment and who actually controlled the storage area; owning the site does not automatically make the contractor liable.

The contract comes first. Supply and subcontract agreements usually say when delivery is complete, when risk of loss passes, and whether the main contractor must provide secure storage and security. Where risk passes on delivery, losses after a signed receipt generally fall on the receiving party. Where risk passes only on installation and acceptance, or where you agreed to store your own materials, the position is reversed.

The acknowledgment comes second. The date, the signatory's authority and the quantities on the delivery receipt are the core evidence that delivery was completed. A delivery evidenced only by your driver's photo, with no signature from the other side, will be argued over far more.

Actual control comes third. Even where the contract is silent, if your materials sat inside an area the contractor fenced, guarded and controlled, where your own staff had to sign in and out, there is a stronger argument that custody was theirs. If your people held the keys or guarded the materials themselves, responsibility is more likely to stay with you.

How liability is finally decided is a question for counsel reading the full contract and the evidence. The aim of the steps in this guide is to put you in a position where that question can actually be answered, rather than becoming one side's word against the other's.

Gather the contract, all delivery receipts, the site access rules and any emails about storage arrangements into one file before you talk to anyone, so the discussion starts from documents rather than memory.

Writing the claim letter

A good claim letter states verifiable facts, the contract basis and a specific request, with the evidence attached, and avoids emotion or inflated figures.

Cover five parts. The facts: delivery dates, who signed, where the materials were kept, and when and how the shortage was found. The loss: a table of items, specifications, quantities and unit prices, using contract or invoice prices, with delivery receipts and invoices attached. The contract basis: quote the delivery, risk and custody clauses verbatim. Your request: payment for the shortfall, a set-off against what the contractor owes you, or replacement with equivalent materials, plus a reasonable deadline for a written reply. The evidence list: count sheets, photos and video, notice emails and the police reference.

On wording, avoid accusing the contractor's workers of theft without solid proof. Saying that the materials went missing inside a site under the contractor's control, and that the contract places custody on the contractor, is safer and keeps you away from a defamation dispute that would only distract from the claim.

If the contractor also owes you unpaid invoices, you can pursue both together, but list them separately so the shortage is not used as an excuse to hold back every payment. For unpaid invoices, see when a contractor does not pay the supplier. Keep copies of every version you send and every reply you receive, because the sequence of correspondence often matters as much as the content.

Send it by a method that proves receipt, such as email with a read confirmation plus a hand-delivered copy signed by the contractor's office.

Will insurance pay?

Find out who insured what before deciding whether to claim from an insurer, from the contractor, or both.

Larger projects often carry contractor's all-risk insurance taken out by the owner or the main contractor, and that cover sometimes includes materials on site awaiting installation. Your own company may also hold property or cargo insurance that covers stock kept at a third party's premises. As soon as you find the loss, ask the main contractor in writing whether the project is insured, who the policyholder is and who must give notice of the loss. At the same time, read your own policy carefully for exclusions such as goods stored off premises, theft without forced entry, or unexplained shortages discovered at a stock count.

Policies often require prompt notice, and late notice can hurt the claim, so notify first and send the supporting documents afterwards. Insurers will want much the same file as the contractor: the shortage list, delivery receipts and invoices, photos and the police report. If the claim is refused or underpaid, see when a business insurance claim is denied.

One caution: once an insurer pays, it may pursue whoever was really responsible. If you settle privately with the contractor and release them from liability before checking the policy, you may damage the insurer's rights and with them your own claim. For a related scenario, see inventory lost to fire or theft. Ask the insurer in writing before signing any release.

Keep a simple log of every call and email with the insurer, including names and dates, because adjusters change and the log saves you from repeating the whole story.

If you cannot agree: from settlement to construction arbitration

Negotiate first, send a formal demand second, and use a dispute process only last; construction disputes in the Philippines can generally go to a specialized arbitration body.

Start with a meeting. Bring your count sheets and evidence to the contractor's project manager or commercial lead. Common outcomes include deducting the loss at contract price from what they owe you, the contractor replacing the materials, sharing the loss according to responsibility, or parking the item until final account. Whatever you agree, record it in a signed supplementary agreement or minutes of meeting rather than relying on a handshake on site.

If talks fail, have a lawyer send a formal demand letter stating the amount, the basis and a final deadline. It creates the record you will need later and often moves the conversation when an informal email did not.

After that comes dispute resolution. Philippine construction disputes are commonly brought before a construction industry arbitration body, especially where the contract contains an arbitration clause. How to start and what to prepare are covered in starting construction arbitration. For smaller amounts, your lawyer may suggest a more economical route instead.

Weigh three things before choosing: the size of the loss, the strength of your evidence, and whether you want to keep working with this contractor. Many suppliers end up settling at final account because the relationship and future orders are worth more than winning one claim outright.

Whichever route you take, keep supplying under the contract unless counsel advises otherwise, because stopping work unilaterally can hand the contractor a counterclaim.

Preventing it next time, and how YIXING can help

The best protection is a contract that states custody clearly, plus a signed acknowledgment and storage confirmation for every delivery.

In the contract, define when delivery is complete, when risk passes, the main contractor's duty to provide secure storage and security, and how shortages are handled and by when. At delivery, have an authorized person sign for every batch with quantities and storage location noted. Deliver valuable or easily diverted items in smaller lots that follow the installation schedule rather than stockpiling them on site for weeks. On site, ask for a separate lockable storage area, reconcile quantities regularly, and confirm any difference in writing the day you find it.

Brief your site staff as well. Everyone stationed at the project should know what to photograph, whom to notify and which form to fill in the moment a shortage is noticed. These habits cost little but turn a dispute you cannot prove into one you can.

YIXING can help review the custody and risk clauses in your supply contracts, put together the shortage list and supporting documents for a claim, translate Chinese-language material, and connect you with a licensed lawyer. We are a private consultancy; we do not appear in court or arbitration and we do not promise the result of any claim. Reach us through YIXING compliance retainer. YIXING is a private consultancy registered with the Philippine SEC (Registration No. CS202009551), holding Bureau of Immigration accreditation (BI Accreditation No. CA-202624381-1, valid until 2027-06-30) as well as DOLE and PRA accreditation. We are not affiliated with any government agency. Every case is different: consult a licensed lawyer; this article is not legal advice.