HANDOUT NO.

5S

A. Remedies Available to Vendor in Case of Non-Payment of Installment in a

Contract of Sale of PERSONAL Property by Installment (RECTO LAW):

Art. 1484 NCC provides:

1) EXACT FULFILLMENT of the obligation, should the vendee fail to pay;

2) CANCEL the sale, should the vendee’s failure to pay cover 2 or more
installments; or

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.

 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.

 Remedies are ALTERNATIVE.

 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).

 Art. 1484 does not apply to cash sales or to real estate mortgages.

B. Sale of REAL Property in Installments

Realty Installment Buyer Protection Act

(RA 6552) MACEDA LAW
Effectivity – September 14, 1972

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):

1) To pay without additional interest unpaid installments due within grace

period earned by him (grace period = I month per 1 year of payments
made. May be exercised only once every 5 years of life of contract and its
extensions, if any)
 2

2) When contract is cancelled, seller to REFUND to buyer the cash surrender

value of the payments equal to 50% of total payments made. After 5
years of installments, plus 5% every additional year therefrom but shall not
exceed 95% of total payments made.

Requisites for cancellation

a. 30 days prior notice to buyer of cancellation or rescission or

rescission by notarial act; and
b. full payment of the cash surrender value to the buyer.

 Excluded from the coverage of the law are sales of

industrial lots, commercial buildings and sales to tenants.

 Down payments, deposits or options paid included in

computation of total payments made.

 In case of less than 2 years of installments, buyer’s grace

period for No. 1 must not be for less than 60 days from
date installment became due. If buyer fails to pay unpaid
installments, seller may cancel contract after 30 days from
receipt by the buyer of the notice of cancellation or the
demand fro rescission of the contract by a 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.

Sources: Pre-Week Memory Aid In All Bar Subjects, Garcia-Gracia, 1997 Edition
The Law on Sales, Agency and Credit Transactions, Hector De Leon
Civil Code of the Philippines, Book No. V, Edgardo Paras, 1995 Edition

A. Villegas