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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, known as the Installment Sales Law or the Recto Law, which then amended Article 1454 of the Civil Code of 1889.
RATIONALE – the object of Recto Law was to remedy the abuses committed in connection with the
foreclosure of chattel mortgages and was meant to prevent mortgagees from seizing the mortgaged
property, buying it at foreclosure sale for a low price and then bringing suit against the mortgagor for a
deficiency judgment.
• Under Article 1484 of the New Civil Code, 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 buyer fail to pay any installment;
2. Cancel the sale, should the buyer’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 buyer’s failure to pay cover two or more installments.
• The remedies have been recognized as alternative, not cumulative, in that the exercise of one would also bar the exercise of the others. They cannot also be pursued simultaneously.
• 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. Any agreement
to the contrary shall be void.
The provisions of Recto Law are applicable to financing transactions derived or arising from
sales of movables on installments, even if the underlying contract at issue is a loan because the
promissory note has been assigned or negotiated by the original seller.
RATIONALE – the object of Recto Law was to remedy the abuses committed in connection with the
foreclosure of chattel mortgages and was meant to prevent mortgagees from seizing the mortgaged
property, buying it at foreclosure sale for a low price and then bringing suit against the mortgagor for a
deficiency judgment.
• Under Article 1484 of the New Civil Code, 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 buyer fail to pay any installment;
2. Cancel the sale, should the buyer’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 buyer’s failure to pay cover two or more installments.
• The remedies have been recognized as alternative, not cumulative, in that the exercise of one would also bar the exercise of the others. They cannot also be pursued simultaneously.
• 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. Any agreement
to the contrary shall be void.
The provisions of Recto Law are applicable to financing transactions derived or arising from
sales of movables on installments, even if the underlying contract at issue is a loan because the
promissory note has been assigned or negotiated by the original seller.
