7. Installment Sales

F. Recto Law (Civil Code, art. 1484)

> Article 1484. In a contract of sale of personal property the price of which is payable in installments, the vendor may exercise any of the following remedies:

(1) Exact fulfillment of the obligation, should the vendee fail to pay;

(2) Cancel the sale, should the vendee's failure to pay cover two or more installments;

(3) Foreclose the chattel mortgage on the thing sold, if one has been constituted, should the vendee's failure to pay cover two or more installments. In this case, he shall have no further action against the purchaser to recover any unpaid balance of the price. Any agreement to the contrary shall be void. (1454-A-a)

7. Maceda Law (R.A. No. 6552)

a. Transactions covered by the Maceda Law b. Computation of the number of installments made c. Rights given to the buyer on installment d. Requisites for a valid cancellation under the Maceda Law e. Consequence of failure to comply with the requisites of a valid cancellation under the Maceda Law

Installment Sales Law

Act No. 4122 was approved on December 9, 1933, otherwise known as the “Installment Sales Law” or the “Recto Law.” It is embodied in Art. 1484 of the NCC, which provides for the remedies of a seller in the contracts of sale of personal property by installments.

Application of Recto Law

This law covers contracts of sale of personal property by installment. (Act No. 4122) It is also applied to contracts 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. (PCI Leasing and Finance, Inc. v. Giraffe-X Creative Imaging, Inc., G.R. No. 142618, July 12, 2007)

NOTE: Recto Law applies only to sale payable in installments and not to a sale where there is an initial payment and the balance is payable in the future, because such is a straight sale, not a sale by installments.