And, thirdly, Article 1191 of the Civil Code did not prohibit the parties from entering into an agreement whereby a violation of the terms of the contract would result to its cancellation. In Pangilinan v. Court of Appeals,[45] the Court upheld the vendor’s right in a contract to sell to extrajudicially cancel the contract upon failure of the vendee to pay the installments and even to retain the sums already paid, holding:
[Article 1191 of the Civil Code] makes it available to the injured party alternative remedies such as the power to rescind or enforce fulfillment of the contract, with damages in either case if the obligor does not comply with what is incumbent upon him. There is nothing in this law which prohibits the parties from entering into an agreement that a violation of the terms of the contract would cause its cancellation even without court intervention. The rationale for the foregoing is that in contracts providing for automatic revocation, judicial intervention is necessary not for purposes of obtaining a judicial declaration rescinding a contract already deemed rescinded by virtue of an agreement providing for rescission even without judicial intervention, but in order to determine whether or not the rescission was proper. Where such propriety is sustained, the decision of the court will be merely declaratory of the revocation, but it is not itself the revocatory act. Moreover, the vendor’s right in contracts to sell with reserved title to extrajudicially cancel the sale upon failure of the vendee to pay the stipulated installments and retain the sums and installments already received has long been recognized by the well-established doctrine of 39 years standing. The validity of the stipulation in the contract providing for automatic rescission upon non-payment cannot be doubted. It is in the nature of an agreement granting a party the right to rescind a contract unilaterally in case of breach without need of going to court. Thus, rescission under Article 1191 was inevitable due to petitioner’s failure to pay the stipulated price within the original period fixed in the agreement.
x x x."
