Installment Sales Law or Recto Law

What is a Recto Law?

It is an Installment Sales Law that provides remedies for the seller in the contract of sale of personal property by installments.





It is embodied in Article 1484 of the Civil Code of the Philippines or the Republic Act No. 386 which amended Art. 1454 of the Civil Code of 1889.

What is the coverage of the Recto Law?

It covers:

1.  Contracts of Sale of personal property by installments.

2.  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).

What are the remedies for the seller under this law?

As provided, the seller shall do:

1.  Exact fulfillment of the obligation, should the vendee fail to pay.

The seller shall file specific performance in court to exact payment from the vendee.  As a general rule, the seller cannot avail other remedy if he opted this.  However, if after choosing, it has become impossible for the vendee to pay the seller, the latter may file for the rescission of the contract.

2.  Cancel the sale, should the vendee’s failure to pay cover two or more installments.

This is rescission of the contract that can be exercised by the seller.  But the vendee must have failed to pay 2 or more installments as a condition thereto.

The requirements for rescission are:

a.  A notarized notice of rescission must have been sent to the buyer.
b.  The seller takes possession of the property subject to the sale.
c.  The seller files action for rescission.



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 the unpaid balance of the price.

See http://www.batasnatin.com/law-library/civil-law/sales/2359-installment-sales-law-recto-law.html for more information.

Sources:  Civil Code of the Philippines, www.batasnatin.com

Note: The featured image is taken from www.bradfordpublishing.com

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