Extinguishment of Sale: How to Terminate a Sales Contract

Extinguishment of sale in general

In general, a sales contract may be extinguished by the same causes as all other obligations and by conventional or legal redemption.[1]

Conventional redemption

Conventional redemption happens “when the vendor reserves the right to repurchase the thing sold, with the obligations to comply with the provisions of Article 1616[2] and other stipulations which may have been agreed upon.”[3] The right to repurchase lasts only for four years from date of the contract unless otherwise stipulated.[4] If there is an express agreement to extend the right to repurchase, it cannot exceed 10 years.[5]

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Novation

Novation takes place when there is an irreconcilable incompatibility between the old and the new obligations.

There are three ways to constitute novation, namely:

(1) By changing the object or principal conditions;

(2) By substituting the person of the debtor; or

(3) By subrogating a third person in the rights of the creditor.

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