Laws on Installment Sales Quiz

Assignment of Credits and Other Incorporeal Rights

• Installment sales are governed by Recto Law and Mecedo Law.
• Recto Law specifies remedies for sellers if the buyer defaults in payment:
  • Demanding payment or fulfillment of the obligation
  • Canceling the sale
  • Foreclosing the chattel mortgage (if one has been constituted)
• Mecedo Law provides rights and benefits to buyers, including:
  • A grace period of up to 60 days if the buyer has paid less than 2 years of installments
  • A notarial notice of cancellation or rescission if the buyer fails to pay within the grace period
  • A 30-day observation period from the notarial receipt of cancellation or rescission before the contract is terminated

Stages of a Contract of Sale

• Negotiation: the period from when the parties indicate interest in the contract to when the contract is perfected
• Perfection: takes place when the essential elements of the sale are met (meeting of the minds of the parties as to the object and price)
• Consummation: begins when the parties perform their respective undertakings under the contract, culminating in its extinguishment

Form of Contract of Sale

• General rule: a contract of sale may be in writing, word of mouth, or partly in writing and partly by word of mouth
• Exceptions:
  • If the law requires a document or special form, contracting parties may compel each other to observe that form
  • Certain contracts must be in writing under the Statute of Frauds, otherwise, they are unenforceable
  • Sale of large cattle requires recording with the city/municipal treasurer and a certificate of transfer

Dation in Payment and Cession

• Dation in payment: a creditor receives something else in exchange for payment of an existing debt in money
• Cession by payment: the assignment or abandonment of all the debtor's assets for the benefit of creditors, so they can sell them and apply the proceeds to their debt
• Key differences between dation in payment and cession:
  • Number of creditors (one vs. several)
  • Financial situation of the debtor (insolvency or not)
  • Extent of property involved (one thing vs. all assets)
  • Ownership and novation implications

Sale Distinguished from Other Transactions

• Barter or exchange: characterized by the manifest intention of the parties, and the consideration consists partly in money and partly in another thing