Sales Part 3

• Sale of Personal Property by Installments RECTO LAW Art. 1484, NCC 
• Sale of Personal Property by Installments RECTO LAW Art. 1484, NCC 

  Remedies Available to Vendor in Case of Non-Payment of Installment in a Contract of Sale of PERSONAL Property by Installments (Recto Law) 
• Requisites for law to apply: 

  (1) a contract of Sale; 

  (2) of personal property; 

  (3) payable in installments; 

  (4) In the case of the second and third remedies, that there has been a failure to pay two or more installments. 
• Art. 1484 NCC provides: 

  (1) EXACT FULFILLMENT (Specific Performance) of the obligation should the vendee fail to pay; - demanding fulfillment 

  (2)CANCEL (Rescission) the sale, should the vendee's failure to pay cover 2 or more installments; or – cancellation/ annulled 

  (3) FORECLOSE THE CHATTEL MORTGAGE on the thing sold if one has been constituted should vendee's failure to pay cover 2 or more installments – getting the collateral 
• 1. (1) EXACT FULFILLMENT (Specific Performance) of the obligation should the vendee fail to pay; - demanding fulfillment 

  • The general rule is than when the seller has chosen specific performance, he can no longer seek for rescission nor foreclosure of the chattel constituted on the thing sold payment 
  • Exception - Art. 1191 --Acceleration clause- the failure to pay one will result to payment of all. When there's an acceleration all payments. Become true and demandable 
  • Deficiency- its the remedy, exacting fulfillment to demand 
• 1. (2)CANCEL (Rescission) the sale, should the vendee's failure to pay cover 2 or more installments; or – cancellation/ annulled 

  • This requires mutual restitution and bars further action on the purchase price. 
  •  General Rule: All partial payments of price or rents must be returned. 
  • Exception: If there is a contrary stipulation which is not unconscionable (Art. 1486, NCC) Forfeiture Clause( the seller is authorize by the law to forfeit all the payments given to him) 
  • Deficiency- its not allowed because it would sound absurd 
• 1. (3) FORECLOSE THE CHATTEL MORTGAGE on the thing sold if one has been constituted should vendee's failure to pay cover 2 or more installments – getting the collateral 

  • In the last case, he should have no further action against the purchaser to recover any unpaid balance of the price; any agreement to the contrary shall be VOID. 
  • Deficiency judgment?- will not be allowed 
• Remedies are ALTERNATIVE, not cumulative. 

  • The exercise of one would bar the exercise of others. The remedies cannot also be pursued simultaneously. 
  • Art. 1484 does not apply to cash sales, straight terms (partly in cash and partly in one term), contracts to sell movables, simple loan, or to real estate. 
• Deficiency Judgment 

  General Rule - NOT ALLOWED 

  1. Recto Law- Stipulation Void 
  2. Pledge- Stipulation Void 
  3. Third Party Mortgagor-  
• Deficiency Judgment 

  Exception: ALLOWED 

  1. REM 
  2. Chattel Mortgage 
  3. Antichresis 
• Art. 1484 applies to contract purporting to be leases of personal property with option to buy, when the lessor has deprived the lessee of the possession or enjoyment of the thing. Any stipulation that the installments or rents paid shall not be returned to vendee or lessee shall be valid insofar as the same may not be unconscionable under the circumstances. (Art. 1485-1486 NCC) 
• Realty Installment Buyer Protection Act (MACEDA LAW) RA6552 

  Effectivity- September 14, 1972 
• RA 6552 governs the sale or financing of real estate on installment payments. 
• RA 6552 governs the sale or financing of real estate on installment payments. 

  Requisites: 

  • Transactions or contracts involving the sale or financing of real estate on installments payments, including residential condominium apartments; and 
  • Buyer defaults in payment of succeeding installments. 
• Rights Granted 

  • The rights granted to a buyer of real estate in a sale or financing covered by the Maceda Law depend on whether or not he has paid less than or more than two (2) years of installments. 
• Buyer is entitled to the following in case of default in payment of the succeeding installments provided the buyer has paid at least two years of installments
• Grace period


  1 month per 1 year of installment payments made
• Buyer has paid at least two years of installments


  Buyer is entitled to the following in case of default in payment of the succeeding installments
• Pay


  Without additional interest, the unpaid installments due within grace period earned by him
• Grace period


  May be exercised only once every 5 years of the life of the contract and its extensions, if any
• Cancellation of contract


  Seller to refund to buyer the cash surrender value of the payments equal to 50% of total payments made and, after 5 years of installments, plus 5% every additional year therefrom but shall not exceed 90% of total payments made
• Requisites for cancellation 

  • Actual cancellation can only take place after thirty (30) days from receipt by the buyer of the notice of cancellation or demand for rescission by a notarial act (NOTICE); and 
  •  full payment of the cash surrender value to the buyer. 
• In case the Buyer has paid LESS than TWO (2) years of installments 

  1. The seller shall give the buyer a grace period of not less than 60 days from the date of installments became due; 

  2) If the buyer fails to pay the installments due at the expiration of the grace period, the seller may CANCEL the contract after 30 days from receipt by the buyer of the notice of cancellation or the demand for rescission of the contract by a notarial act. 
• OTHER RIGHTS Granted to the Buyer 

  • Buyer shall have the right to sell his rights or assign the same to another person OR to reinstate the contract by updating the account during the grace period and before actual cancellation of the contract. The deed of assignment shall be done by notarial act. 
  • Buyer shall have the right to pay in advance any installment or the full unpaid balance of the purchase price any time without interest and to have such full payment of the purchase price annotated in the certificate of title covering the property. 
• Any stipulation to the contrary shall be VOID 
• Transactions Excluded 

  • Sales covering industrial lots; 
  • Sales covering commercial buildings (and commercial lots by implication; and 
  • Sales to tenants under the agrarian reform laws. 
• ✓ Maceda Law cannot be availed of by the Developer 
• 1485- Lease of personal property with option to buy 
• 1486 -Stipulation authorizing forfeiture of installments or rents paid (Forfeiture Clause) 
• 1487-Expenses for execution and registration 

  General Rule-Seller 

  Except- Buyer, if there is a stipulation 
• 1488-Expropriation for public use- procedure