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INSTALLMENT SALES LAW- RECTO LAW

Category: Sales

INSTALLMENT SALES LAW

What is the Installment Sales Law?

Commonly known as 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.

Note: Art. 1484 of the NCC incorporates the provisions of Act No. 4122 passed by the Philippin
e Legislature on Dec. 9, 1939, known as the "Installment Sales Law" or the "Recto Law," which t
hen amended Art. 1454 of the Civil Code of 1889.

To what does the Recto Law apply?

This law covers contracts of sale of personal property by installments (Act No. 4122). It is also a
pplied to contracts purporting to be leases of personal property with option to buy, when the l
essor has deprived the lessee of the possession or enjoyment of the thing. (PCI Leasing and Fin
ance Inc. v. Giraffe-X Creative Imaging, Inc., G.R. No. 142618, July 12, 2007)
What are the alternative remedies in case of sale of personal property in installments?

1. Specific Performance: Exact fulfillment should the buyer fail to pay

General Rule: If availed of, the unpaid seller cannot anymore choose other remedies;

Exception: if after choosing, it has become impossible, rescission may be pursued

2. Rescission: Cancel the sale if buyer fails to pay 2 or more installments Deemed chosen when:

a. Notice of rescission is sent

b. Takes possession of subject matter of sale

c. Files action for rescission

3. Foreclosure: Foreclose on chattel mortgage if buyer fails to pay 2 or more installments

General Rule: Actual foreclosure is necessary to bar recovery of balance - Extent of barring effec
t: purchase price

Exception: Mortgagor refuses to deliver property to effect foreclosure; expenses incurred in attor
neys fees, etc.

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