Act No. 4122 known as the “Installment Sales Law” or “Recto Law” is a 1933 law that has been incorporated in Articles 1484 to 1486 of the New Civil Code.
What is the purpose of the law?
To remedy the abuses committed in connection with the foreclosure of chattel mortgages. This prevents 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.
What are the contracts covered under the law?
1. Contract of sale of personal property the price of which is payable in 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.
What is the difference between Recto Law and Maceda Law?
Recto Law refers to the sale of “personal property” on an installment basis.
Maceda Law refers to the sale of “real property” on an installment basis.
What are the 3 remedies of the seller in case of buyer’s or lessee’s default?
1. Specific Performance
Seller shall make a demand against the buyer for the exact fulfillment of his obligation.
The seller shall cancel the sale and demand for the return of the property. This is applicable when the buyer fails to pay 2 or more installments.
3. Foreclosure, if one has been constituted.
The seller shall recover the property from the buyer for it to be sold in public auction. This is applicable when the buyer fails to pay 2 or more installments. In this case, the seller shall have no further action against buyer to recover any unpaid balance of the price. Any agreement to the contrary shall be void.
What is the nature of the remedies under the law?
The three (3) remedies provided for in the "Recto Law" are alternative and not cumulative; the exercise of one would preclude the other remedies.
Is it valid to stipulate that the installments or rents that have paid shall not be returned to the buyer or lessee?
Yes. A stipulation that the installments or rents paid shall not be returned to the vendee or lessee shall be valid insofar as the same may not be unconscionable under the circumstances.
 Manila Trading & Supply Co. vs. E.M. Reyes, G.R. No. L-43263 (October 31, 1935)  Art. 1484, New Civil Code  Art. 1485, New Civil Code  Art. 1484, New Civil Code  Spouses Dela Cruz vs. CA, G.R. No. 94828 (September 18, 1992)  Ref: Art. 1486, New Civil Code