When a buyer fails to pay the price, the seller has remedies, but the rules depend on the object. For the sale of movables, the law provides that failure to pay may automatically rescind the sale in certain cases (for example, where the goods have not been delivered and the buyer fails to pay). For reciprocal obligations generally, the injured party may choose between demanding fulfillment or rescission of the obligation, with damages in either case (Article 1191). For the sale of immovable (real) property, there is a special protective rule (Article 1592): even though it may have been stipulated that failure to pay the price at the agreed time causes rescission, the buyer may still pay after the deadline, as long as no demand for rescission has been made upon them judicially or by a notarial act; once such a demand is made, the court may not grant the buyer further time. Additionally, for sales of real property on installment, the Maceda Law gives residential buyers grace periods and, in some cases, a refund before the contract can be cancelled. So a seller cannot always instantly cancel a sale for late payment, especially for real property; the proper demand and the buyer's protective rights must be observed.
Remedies for Non-Payment
For reciprocal obligations generally, the injured seller may choose fulfillment or rescission, with damages (Article 1191). For movables, non-payment may automatically rescind in certain cases.
The Special Rule for Immovables (Art. 1592)
Even if the contract says failure to pay on time causes rescission, the buyer of real property may still pay after the deadline as long as no demand for rescission has been made judicially or by notarial act. Once the demand is made, the court may not grant further time.
Installment Sales: the Maceda Law
For real property sold on installment, the Maceda Law gives residential buyers grace periods and, in some cases, a refund before cancellation.
Practical Takeaways
- A seller unpaid may seek fulfillment or rescission with damages;
- For real property, the buyer can pay until a proper demand for rescission is made;
- Installment buyers have Maceda Law grace periods and refunds — no instant cancellation.
Frequently Asked Questions
Can a seller cancel a sale if the buyer doesn't pay? Yes, but the rules differ. For reciprocal obligations, the seller may choose fulfillment or rescission with damages. For real property, special protective rules apply before cancellation.
What is the special rule for the sale of real property? Under Article 1592, even if failure to pay on time is stipulated to cause rescission, the buyer may still pay after the deadline as long as no demand for rescission has been made judicially or by notarial act.
Does the Maceda Law protect installment buyers? Yes. For sales of real property on installment, the Maceda Law gives residential buyers grace periods and, in some cases, a refund before the contract can be cancelled.
Can a seller instantly cancel for late payment of real property? Generally no. Especially for real property, the seller must make the proper demand for rescission, and the buyer's protective rights, including under the Maceda Law for installments, must be observed.
This commentary is for general informational purposes only and does not constitute legal advice. For guidance specific to your situation, please consult a licensed attorney.
If you have questions about your rights or options under Philippine law, our firm is available to assist. You may reach us via Viber or WhatsApp, call us at 0995 433 5550, or send an email to vivasnobles@gmail.com. We look forward to hearing from you.