Cash Sale vs Installment Sale: Philippine Rules Compared

Short answer: In a cash sale the full price is paid at or near delivery, ownership usually passes on delivery, and if the buyer fails to pay the seller relies on the general Civil Code remedies (Arts. 1191 and 1592). In an installment sale the price is paid over time and special laws protect the buyer on default: the Maceda Law (RA 6552) for residential real estate and the Recto Law (Civil Code, Art. 1484) for movables such as cars and appliances. Most real estate installment deals are also written as contracts to sell, so the seller keeps ownership until the last payment.

The label on the document matters less than how the price is actually paid and when ownership is meant to pass. This guide compares the two side by side. For the related question of whether ownership passes at signing at all, see contract of sale vs contract to sell.

Cash sale vs installment sale at a glance

Question	Cash sale	Installment sale of real estate	Installment sale of movables
How is the price paid?	In full, at or near delivery	Down payment plus installments over months or years	Down payment plus installments
When does ownership pass?	On delivery, including execution of a notarized deed (Arts. 1477 and 1498)	Usually only on full payment, because most are contracts to sell	On delivery unless ownership is reserved; often secured by a chattel mortgage
Typical document	Deed of absolute sale	Contract to sell or deed of conditional sale	Sales contract with chattel mortgage
Seller’s remedy on default	Specific performance or resolution with damages (Art. 1191); for real property, resolution after a judicial or notarial demand (Art. 1592)	Cancellation only after the Maceda Law grace period, notarial notice and any refund due	One of three options under Art. 1484: exact payment, or, after two or more missed installments, cancel the sale or foreclose the chattel mortgage
Special buyer protection	None beyond the general rules	Maceda Law grace periods and cash surrender value	Recto Law bar on collecting a deficiency after foreclosure

What counts as a cash sale?

A sale is a cash sale when the seller receives the whole price at once, even if the buyer borrowed the money. When a bank or Pag-IBIG releases the loan proceeds to the seller, the seller has been paid in full; the buyer’s continuing obligation is to the lender, usually secured by a real estate mortgage on the property. If the buyer later defaults, that is generally handled through the mortgage and foreclosure rules rather than the Maceda Law, which protects buyers paying the seller or developer in installments. See real estate mortgage and deficiency after foreclosure.

In a cash sale of real property where the buyer has not paid and a period was set, the buyer may still pay after the period expires as long as the seller has not made a judicial or notarial demand for rescission (Art. 1592). After such a demand, the court may not grant the buyer a new term.

Installment sales of real estate: the Maceda Law

The Maceda Law covers sales and financing of real estate on installment, including residential condominium units. It does not cover industrial lots, commercial buildings, or sales to tenants under agrarian reform laws (RA 6552, Sec. 3). Down payments, deposits and options count toward the number of installments paid.

Installments paid	Grace period	If the seller cancels
At least two years	One month for every year of installments paid, usable once every five years of the contract (Sec. 3(a))	The buyer receives a cash surrender value of 50% of total payments, plus 5% a year after five years of installments, up to 90%. Cancellation takes effect 30 days after the buyer receives a notarial notice of cancellation and only upon full payment of the cash surrender value (Sec. 3(b))
Less than two years	At least 60 days from the date the installment became due (Sec. 4)	The seller may cancel 30 days after the buyer receives a notice of cancellation or demand for rescission by notarial act; no cash surrender value is required by the law

The buyer may also sell or assign their rights before cancellation, and may pay the full balance at any time without interest (Secs. 5 and 6). For details and edge cases, see when the Maceda Law applies and what happens if the buyer misses installments.

Installment sales of movables: the Recto Law

When a car, appliance or other movable is sold on installment and the buyer defaults, the seller must choose one remedy under Article 1484: demand exact fulfillment of the payments; cancel the sale; or foreclose the chattel mortgage on the thing sold, if one was constituted. Cancellation and foreclosure are available only if the buyer’s failure to pay covers two or more installments. If the seller forecloses, it cannot sue the buyer for any unpaid balance, and any agreement to the contrary is void. Article 1485 applies the same rules to a contract described as a lease of personal property with an option to buy, when the lessor has taken back possession or enjoyment of the thing. See the Recto Law.

Which is better for the buyer and for the seller?

Party	Cash sale	Installment sale
Buyer	Ownership and title transfer immediately, often at a discount, but all the price is at risk at signing, so due diligence before signing is essential	Smaller upfront exposure and statutory protection on default, but ownership is delayed and the seller still holds the title
Seller	Full price at once and a clean exit	A higher total price, but cancellation is slower and may require a refund

Buyers of subdivision lots and condominium units on installment from a developer have an added protection: the developer must register the contract to sell with the Registry of Deeds (PD 957, Sec. 17), which puts later buyers and lenders on notice. See also refunds from a developer.

Where do earnest money and down payments fit?

In either kind of sale, earnest money is part of the price and proof that the sale was perfected (Art. 1482). In an installment sale of real estate, the down payment also counts toward the installments that decide the buyer’s Maceda Law rights. See earnest money vs down payment vs option money.

Your options and what to do next

Start by reading your contract to see whether the price is paid in full or in installments, whether ownership passes now or only on full payment, and what notice the seller must give. Then pick the route that fits your situation.

Your situation	What to do	Where to go
Buyer behind on real estate installments	Compute the installments paid, including the down payment, to know your Maceda Law grace period; pay or update the account within it, or sell or assign your rights before cancellation (RA 6552, Secs. 3–5)	Seller or developer, in writing; keep official receipts
Buyer who received a cancellation notice	Check that it is a notarial notice and, if you paid at least two years, that the cash surrender value was paid; cancellation takes effect only after both (Sec. 3(b))	Seller or developer, in writing; a lawyer or PAO before the 30-day period runs out
Buyer of a car or appliance in default	Ask which Art. 1484 remedy the seller is using; if the seller forecloses the chattel mortgage, it cannot also collect the unpaid balance	Seller or financing company, in writing; a lawyer or PAO if sued
Seller with an unpaid cash sale of land	Send a judicial or notarial demand for rescission before treating the sale as cancelled (Art. 1592)	Notary public; barangay, then court if unresolved

Where both parties are individuals living in the same city or municipality, the dispute generally goes to barangay conciliation before any court case, subject to exceptions (Local Government Code, Secs. 408 and 412). If you cannot afford a lawyer, ask the Public Attorney’s Office whether you qualify for free assistance.

Your first action today: gather the contract, every official receipt and any notice you received, and list the dates and amounts of all payments. That record decides which law applies and what rights you have.

Frequently asked questions

Can the seller cancel a cash sale because the buyer paid late?

Not automatically. For real property the seller must first make a judicial or notarial demand for rescission (Art. 1592), and resolution generally requires a substantial breach. See cancelling a sale for late payment.

Does the Maceda Law apply to a car bought on installment?

No. The Maceda Law covers real estate. Installment sales of cars and other movables fall under the Recto Law (Arts. 1484 and 1485).

Does the Maceda Law apply if I took a bank or Pag-IBIG housing loan?

Generally the seller was paid in full by the lender, so your default is usually governed by the loan and mortgage rather than by the Maceda Law. Check your loan documents and the lender’s rules on restructuring before payments fall behind.

Primary legal sources

Sources rechecked as of: October 4, 2026

This guide provides general Philippine legal information and is not legal advice for a particular transaction. The outcome of a default depends on the written contract, the payments made and the notices actually served.

Cash Sale vs Installment Sale in the Philippines: Ownership, Default and Buyer Protection