Article 1484 of the New Civil code incorporates the provisions of Act No.

4122 passed
by the Philippine Legislature on Dec. 9, 1939, known as the "Installment Sales Law" or the
"Recto Law". Recto Law laid down the remedies available to the vendor in sale of personal
property payable in installments. Its main purpose is to prevent potential abuses by the seller in
the event that the buyer is unable to make further installments for a property. Recto Law covers
contracts of sale of personal property by installments (Act No. 4122). It is also applied to
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).
The Recto Law forms part of the New Civil Code by way of incorporation into Art. 1484,
which provides that 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 vendee fail to pay;
(2) Cancel the sale, should the vendee’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 vendee’s failure to pay cover two or more installments. In this case, 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.
Note that these three remedies are alternative not cumulative which means that if the
vendor chooses one of the remedies, he can no longer avail the remaining ones. Thus, if the
vendor opt for the remedy of cancellation, then he can no longer avail the remedy for specific
performance nor foreclosure.
The first remedy available to the vendor is specific performance. From the word itself,
the vendor is merely collecting the unpaid balance from the vendee. Here, the vendor who
chooses to enforce the fulfillment of the obligation is not limited to the proceeds of the sale of
the mortgaged goods because he may still recover from the purchaser the unpaid balance of the
price, if any, on the real and personal properties of the purchaser not exempt by law from
attachment or execution.
The second remedy available is cancellation or rescission of the contract of sale. This
can be availed by the vendor if 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 that
must have been sent to the vendee, b) the vendor takes possession of the property subject to the
sale and, c) the vendor files action for rescission. The nature of this remedy requires mutual
restitution and bars further action on the purchase price. As a general rule, the cancellation of
sale requires mutual restitution that is all partial payments of price or rents must be returned
unless there is a stipulation about forfeiture because according to Art. 1486, a stipulation
authorizing the forfeiture of installments or rents paid meaning that they need not to be returned,
is valid insofar as the same may not be unconscionable under the circumstances; otherwise, the
court has the power to order the return of a portion of the total amount paid in installments or
rents.
Lastly, the third available remedy for the vendor in a contract of sale of personal property
with the price of which is payable in installments is the remedy of foreclosure of the chattel
mortgage if one has been given on. This remedy usually takes place when a person takes a loan
to buy something and he mortgages the thing he bought to ensure the creditor that he will pay the
loan. But, what does foreclosure mean? Foreclosure is defined as the legal process by which a
lender attempts to recover the amount owed on a defaulted loan by taking ownership of and
selling the mortgaged property.
However, it’s important to note that a creditor is not obliged to foreclose a chattel
mortgage even if there is one precisely because the law says that any of the remedies may be
exercised by the seller so the seller has three available options. He may still sue for fulfillment or
for cancellation of obligation if he does not want to foreclose. In fact, he may still avail himself
of the first remedy which is specific performance and may still ask that a real estate mortgage be
executed to secure the payment of the obligation, in which case, and in the event of the
foreclosure, there can still be recovery of the deficiency.
As a general rule, if the vendor opts for this remedy, then he is not obliged to return to the
vendee the amount of the installments already paid should there be an agreement to that effect.
The vendor shall have no further action against the vendee for the recovery of any unpaid
balance of the price remaining after the foreclosure and actual sale of the mortgaged chattel. Any
agreement to the contrary is void.” – any unpaid balance here refers to the deficiency judgment
to which the mortgagee may be entitled where, after the mortgaged chattel is sold at public
auction, the proceeds obtained therefrom are insufficient to cover the full amount of the secured
obligation. It includes all other claims that may likewise be called for such as interest on the
principal, attorney’s fees, expenses of collection, and the costs. Were it the intention of the
legislature to limit its meaning to the unpaid balance of the principal, it would have so stated.
Actual sale in accordance with the Chattel Mortgage Law (Act No. 1508, Sec. 14.) resulting in a
deficiency of the mortgaged chattel is the foreclosure contemplated by law.
However, where the amounts adjudged in favor of the vendor-mortgagee were not part of
the unpaid balance of the purchase price or in the concept of a deficiency judgment but were
expenses of the suit, the remedy of foreclosure is not applicable. Moreover, when the assignee
forecloses on the mortgage, there can be no further recovery of the deficiency and the seller-
mortgagee is deemed to have renounced any right thereto. Article 1484, however, does not bar
one to whom the seller-mortgagee has assigned on a with-recourse basis his credit against the
buyer from recovering from the seller the assigned credit in full although the seller may have no
right of recovery against the buyer for the deficiency.
To encapsulate and apply the information above, here is an example:
Ace bought a Sport Utility Vehicle on installments from Diego. Payment was
secured by a chattel mortgage. The promissory note and the mortgage was assigned by
Diego to Romer, his assignee. Ace defaulted on the installment payments. As a
 consequence, Romer demanded payment of the entire unpaid balance of the price or
surrender of the truck. Ace replied that he was voluntarily surrendering the truck to
Romer. He said the truck was being repaired at the shop of Diego as it had met with an
accident, that there was too much delay in the repair, and that he was not satisfied with
the repair of the finished portions. Romer decided not to get the truck. Instead, he filed a
suit for the recovery of the balance of the obligation.
Here, the provisions of Article 1484 apply since the case involves the sale of personal property
on installments. As mentioned, the remedies provided for in Article 1484 are considered
alternative, not cumulative such that the exercise of one would bar the exercise of the others.
Romer has not cancelled the sale, nor he has exercised the remedy of foreclosure. Foreclosure,
judicial or extrajudicial, presupposes something more than a mere demand to surrender
possession of the object of the mortgage. Since Romer has not availed the remedy of cancellation
or rescission of the sale of the truck in question nor foreclosing the chattel mortgage on said
truck, Romer is left and is still free to avail the remaining remedy which is exact fulfillment of
the obligation of Ace, the buyer of the said truck.

In its entirety, Article 1484 does not apply to a sale of personal property on straight term
or partly in cash and partly in term. Where the balance, after payment of the initial sum, should
be paid in its totality at the time specified, the transaction is not by installment as contemplated
in Article 1484. Neither does the article apply to sale of immovable property nor to real estate
mortgage.

To recap, there are three (3) remedies available to a vendor in sale of personal property
payable in installments otherwise embodied in the "Installment Sales Law" or the "Recto Law”
which are: remedy of specific performance, remedy of cancellation and remedy of foreclosure
with each being alternative (only one can be enforced) and not cumulative to the other such that
if the vendor avails one of the remedies, he is already barred from availing the rest.

References:
Books
Law on Sales, Agency and Credit Transactions by Hector S. De Leon
Sales, Agency and Bailments (2017 edition) by Atty. Andrix D. Dominggo, CPA, MBA

Handouts
Topic 4- Handouts, Topic 4 (TRANSCRIPT NOTES) by Atty. Dente

Online Sources
https://batasnatin.com/law-library/civil-law/sales/2359-installment-sales-law-recto-law.html
https://www.divinalaw.com/live-now-pay-later/
https://www.investopedia.com/terms/f/foreclosure.asp