RECTO LAW
 Article 1484 of the Civil Code provides for the remedies of a seller in
contracts of sale of personal property by installments, and incorporates
the provisions of Act No. 4122 passed by the Philippine Legislature on 9
December 1939, known as the “Installment Sales Law,” but more popularly
referred to as the “Recto Law,” which then amended Article 1454 of the
Civil Code of 1889. 
 sale or financing of real estate on installment payments, including
REMEDIES
 (Art. 1484) In a sale of personal property the price of which is payable in
installments, the SELLER may exercise any of the following REMEDIES:
1. ACTION FOR SPECIFIC PERFORMANCE -Exact fulfillment of
the obligation, should the buyer fail to pay any installment;
2. RESCISSION - Rescind the sale, should the buyer’s failure to pay
cover two or more installments;
3. FORECLOSURE OF CHATTEL MORTGAGE - Foreclose the
chattel mortgage on the thing sold, if one has been constituted,
should the buyer’s failure to pay cover 
 two or more installments.
 The article specifically provides that if the seller should foreclose on the
mortgage constituted on the thing sold, he shall have no further action
against the purchaser to recover “any unpaid balance of the price” and any
agreement to the contrary shall be void.
COVERAGE OF THE LAW
RULE: all sale of movables on installments are covered by the law
NOT COVERED BY RECTO LAW
1. Initial payment, and payment of balance in future
2. Contracts to Sell
NOTE: In all other cases, where the financing transaction is not derived from a
sale, the provisions of the Recto Law do not apply.
MACEDA LAW
 It should be noted that the Maceda Law does not cover all sales of realty
on installments, but primarily RESIDENTIAL REAL 
 ESTATE
 But unlike the Recto Law on movables, the Maceda Law covers not only
“sales” on installments of real estate, but also “financing” of such
acquisitions. It expressly covers “all transactions or contracts involving the
residential condominium apartments.
 Unlike Article 1592 of the Civil Code, which the Court has interpreted not
to be applicable to contracts to sell, the Maceda Law clearly includes in its
provisions BOTH CONTRACT OF SALE AND CONTRACT TO SELL.
 This conclusion is clear from the use by the Law of the twin terms of
“notice of cancellation or the demand for rescission” of the contract.
 Should involve at least two (2) installments to be paid in the future at
the time of the perfection of the contract. • The rationale of Levy
Hermanos, Inc. as to sales of movables, equally should apply to sale of
real estate in installments, thus: “the law is aimed at those sales where the
price is payable in several installments, for, generally, it is in these cases
that partial payments consists in relatively small amounts, constituting thus
a great temptation for improvident purchasers to buy beyond their means.”
 In any event, the public policy behind the Maceda Law is so all-
encompassing with respect to residential real estate and condominium
units, that it would cover even sales or financing transactions which
may not fit into the “installment” concept.
NOT COVERED 
 BY MACEDA LAW
 Sales covering industrial lots;
 Sales covering commercial buildings (and
commercial lots by implication); and Sales to tenants under agrarian
reform laws.
 The enumeration of the transactions not covered by the Maceda Law is
not exclusive, since other transactions over immovables, although not
within the enumerated exclusions are to be considered as excluded
because they are not within the clearly expressed coverage.
 An example would be the sale on installment of commercial or office
condominium units
 In one case, the Court held that the Maceda Law normally applies to the
sale or financing of real estate on installments payments, and excludes
“industrial lots, commercial buildings, and sales to tenants under R.A. No.
3844. It has no application to a sale on installment of a commercial
building.
NOTE: Maceda Law cannot be invoked by highest bidder in foreclosure
proceedings
  The Court has ruled that the terms of the Maceda Law cannot be invoked a. GRACE PERIOD- a grace period of sixty (60) days from the date the
by a person or entity who acquired the subdivision lots in a foreclosure installment became due.
sale on the mortgaged constituted thereon by the developer. Such person
or entity, although binding itself to the terms of the contracts of sale, is not  If the buyer fails to pay the installments due at the expiration of the grace
the real party to the original installment sales, and more importantly, does period, the seller may cancel the contract after thirty (30) days from receipt
not have any rights promoted under the Maceda Law which contains by the buyer of the notice of cancellation or the demand for rescission of
provisions for the benefits of real estate buyers on installments. the contract by a notarial act. 

 Also, Maceda Law Cannot Be Availed of by Developer
NOTE: NO Cash Surrender Value 


HOW CANCELLATION OF CONTRACT CAN BE EFFECTED

The actual cancellation of the contract shall take place after thirty (30) days from
receipt by the buyer of the notice of cancellation or the demand for rescission
of the contract by a notarial act

1. At Least Two (2) Years Installments Paid

Where the buyer has paid at least two (2) years of installments, he is entitled to the
following rights in case he defaults in the payments of succeeding installments:
a. GRACE PERIOD- To pay, without additional interest, the unpaid
installments due within the total grace period earned by him, which is fixed
at the rate of one (1) month grace period for every one (1) year of
installment payments;

Exercise of Grace Period

o The right to make use of the grace period can be exercised by the
buyer only once in every five (5) years of the life of the contract
and its extensions, if any.
o Down payments, deposits or options on the contract shall be
included in the computation of the total number of installments
made. 


b. CASH SURRENDER VALUE- If the contract is cancelled, the seller

shall refund to the buyer the cash surrender value of the payments on the
property equivalent to 50% of the total payments made and, after five (5)
years of installments, an additional 5% every year but not to exceed 90%
of the total payments made.

 This must be given with the notice of Cancellation or Rescission

2. Less than 2 years Installments Paid

 In case where less than two (2) years of installments were paid, the buyer
shall still be entitled to:
ACTUAL OR MORAL NOMINAL TEMPERATE OR LIQUIDATED EXEMPLARY OR
COMPENSATORY MODERATE CORRECTIVE
Nature
Adequate compensation Physical suffering, Adjudicated in order that More than nominal but Agreed upon by the Imposed by way of
for pecuniary loss mental anguish, fright, a right of the plaintiff, less than compensatory; parties to a contract, to example or correction for
suffered serious anxiety, which has been violated may be recovered when be paid in case of the public good, in
besmirched reputation, or invaded by the the court finds that some breach thereof addition to the moral,
wounded feelings, moral defendant, may be pecuniary loss has been temperate, liquidated or
shock, social humiliation vindicated or suffered but its amount compensatory damages
and similar injury recognized, not for the cannot, from the nature
purpose of indemnifying of the case, be proved
the plaintiff for any loss with certainty
suffered by him
Requisites for Recovery
Must be pleaded and • Injury clearly • Imposed by way of
proven in court with the sustained by the example in
best evidence available claimant; 
 addition to
(e.g., official receipts) • Culpable act or compensatory
omission damages after
factually the claimant’s
established; 
 right to them has
• Wrongful act or been
omission of the established; 

defendant is the • Cannot be recovered
proximate cause as a matter of
of the injury; and right; depends

 upon the amount
• Award of damages of compensatory
predicated on damages that
any of the cases may be
under Article awarded; 

2219, CC 
 • Act accompanied by
bad faith or done
in a wanton,
fraudulent,
oppressive or
malevolent
manner 

Jurisprudential Guidelines
 Put the injured party  There must be proof  If the dismissal was  Temperate  In ejectment cases,  Cannot be recovered
in the position in of fraudulent action or for cause, the lack of damages proper where no liquidated as a matter of right,
which he had been bad faith for the claim statutory due where injury is damages are agreed but need not be
before he was to succeed; it cannot process should not caused to one’s upon, the only proved, although
injured 
 arise from simple nullify the dismissal; commercial damages that can be plaintiff must show
 Actually sustained negligence 
 however, this credit or to a recovered are the that he is entitled to
and susceptible of  Recoverable in a violation of the right business firm’s fair rental value or moral, temperate or
 measurement 
 damage suit to statutory due goodwill the reasonable compensatory
 Except as provided predicated upon a process warrants the  Temperate compensation for the damages before the
by law or stipulation, breach of contract payment of damages can use and occupation court may consider
a party is entitled to of carriage only indemnity in the form and should be of real property whether or not
adequate where 
 of nominal damages awarded on top exemplary damages
compensation only a. Mishap results of actual or should be awarded
for such pecuniary in the death of a compensatory 

loss as he has duly passenger; 
 damages in  Also known as
proven 
 b. It is proved that instances where punitive or vindictive
 Cannot be the carrier was the injury is damages 

presumed; award guilty of fraud chronic and  Intended to serve as

must be based on and bad faith continuing. 
 a. Deterrent to
the evidence even if death serious
presented, not on does not result 
 wrongdoings;
the personal 
 b. A vindication of
knowledge of the  Although the 
 undue
court and certainly institution of a clearly sufferings and
not on flimsy, unfounded civil suit wanton invasion
remote, speculative can at times be a of the rights of
and nonsubstantial legal justification for an injured; or
proof 
 the award of c. A punishment
attorney’s fees, such for those guilty
is not a ground for an of outrageous
award of moral conduct.
damages 
 Relative to the civil
aspect of the case, an
aggravating
circumstance, whether
ordinary or qualifying,
should entitle the
offended party to an
award of exemplary
damages within the
unbridled meaning of
Article 2230
Possible Combinations (based on jurisprudence)
 Temperate – if  Actual  Attorney’s Fees  On top of actual  Attorney’s Fees  moral, temperate or
chronic and  Exemplary or compensatory actual damages
continuing  Attorney’s Fees if chronic and must be awarded 

 Moral continuing
 Exemplary  Moral
 Attorney’s Fees  Exemplary
  Attorney’s Fees