Short answer. Under Article 1484, the Recto Law, the seller of personal property on installments may cancel the sale or foreclose the chattel mortgage only when the buyer's failure to pay covers two or more installments. A single missed installment is not enough for those two remedies.
What the law says
should the vendee's failure to pay cover two or more installments
Civil Code, Article 1484 — Recto Law (Installment Sale of Personalty). Read the full provision →
Two or more installments for cancellation or foreclosure
Article 1484, known as the Recto Law, governs the installment sale of personal property. It gives the seller a choice of remedies, but two of them are unlocked only by a specific level of default. The seller may cancel the sale, and may foreclose the chattel mortgage on the thing sold if one was constituted, in each case should the vendee's failure to pay cover two or more installments. So for cancellation and foreclosure, the trigger is failure covering at least two installments. Missing just one installment does not, on its own, entitle the seller to cancel or to foreclose under this article.
The three remedies, and why they are alternatives
The law lays out three options for the seller: exact fulfillment of the obligation should the buyer fail to pay; cancel the sale on a default of two or more installments; or foreclose the chattel mortgage on the same default. These are alternative, not cumulative — the seller chooses one path. The two-installment threshold conditions the second and third options. The first remedy, simply suing to collect what is due, does not carry the same two-installment requirement, because there the seller is enforcing the contract rather than undoing it or seizing the security.
The trap in foreclosure: no deficiency claim
Foreclosure carries a consequence buyers and sellers both need to understand. Article 1484 provides that when the seller forecloses the chattel mortgage, he shall have no further action against the purchaser to recover any unpaid balance of the price. In other words, if the seller repossesses and forecloses, he cannot then chase the buyer for whatever the sale of the property failed to cover. This is the heart of the Recto Law's protection: it stops sellers from seizing the goods and still pursuing the buyer for the shortfall. Choosing to foreclose therefore closes the door on any deficiency recovery.
Contrary agreements are void
Sellers cannot draft their way around these protections. The article states flatly that Any agreement to the contrary shall be void. So a clause letting the seller foreclose and still sue for the deficiency, or one purporting to allow cancellation on a single missed installment against the law's terms, has no effect. This makes the two-installment threshold and the no-deficiency rule genuinely protective rather than optional. Buyers of appliances, vehicles and other personalty on installment enjoy these safeguards regardless of fine print, and sellers must pick their remedy knowing the limits the Recto Law imposes on each one.
Cases citing this provision
These Supreme Court decisions cite the provision above. We list them so you can read them yourself; the summaries of what each decided are not ours to give.
- PCI Leasing & Finance InC. vs. Giraffe-X Creative Imaging, Inc, G.R. No. 142618, July 12, 2007 — read the decision on LawPhil →
- Spouses Alfredo and Brigida Rosario vs. PCI Leasing and Finance Inc, G.R. No. 139233, November 11, 2005 — read the decision on LawPhil →
- Daniel L. Borbon II, et al. vs. Servicewide Specialists, et al, G.R. No. 106418, July 11, 1996 — read the decision on LawPhil →
- Equitable Savings Bank vs. Rosalinda C. Palces, G.R. No. 214752, March 9, 2016 — read the decision on LawPhil →