ACYRFBT: Philippine Lemon Law - RA 10642 - An Act Strengthening Consumer Protection in the Purchase of Brand New Motor Vehicles

Declaration of Policy

It is hereby declared the policy of the State to promote full protection to the rights of consumers in the sale of motor vehicles against business and trade practices which are deceptive, unfair or otherwise inimical to consumers and the public interest.

Brand New Motor Vehicle

Refers to a vehicle constructed entirely from new parts and covered by a manufacturer's express warranty at the time of purchase that it has never been sold or registered with the Department of Transportation and Communication or an appropriate agency or authority, and has never been operated on any highway of the Philippines or in any foreign state or country.

Collateral Charges

Refer to the fees paid to the LTO for the registration of a brand new motor vehicle and other incidental expenses such as, but not limited to, the cost of insurance pertaining to the vehicle, chattel mortgage fees and interest expenses if applicable.

Comparable Motor Vehicle

Refers to a motor vehicle that is identical or reasonably equivalent to the motor vehicle to be replaced, in terms of specifications and values, subject to availability, as the motor vehicle existed at the time of purchase: Provided, there shall be an offsetting from this value for reasonable allowance for its use.

Consumer

Refers to any person, natural or juridical, who purchases a brand new motor vehicle either by cash or credit from an authorized distributor, dealer, or retailer in the Philippines.

Dealer or Retailer

Refers to any person, natural or juridical, authorized by the manufacturer or distributor to sell brand new motor vehicles directly to the retail buyers and the public.

Distributor

Refers to any person, natural or juridical, authorized by the manufacturer to sell brand new motor vehicles to duly authorized dealers or retailers.

Department of Trade and Industry

The implementing agency of the Philippine Lemon Law.

Lemon Law Rights Period

Whichever comes first:

a. The period ending 12 months after the date of the original delivery of a brand new motor vehicle to a customer.

b. The first 20,000 kilometers of operation after delivery.

This shall be the period during which the consumer can report any nonconformity to the standards and specifications of the manufacturer, authorized distributor, authorized dealer or retailer, and pursue any right

Manufacturer

Refers to any person, natural or juridical, engaged in the business of manufacturing or assembling motor vehicles.

Motor Vehicles

Refer to any self-propelled, four (4) wheeled road vehicle designed to carry passengers including, but not limited to, sedans, coupes, station wagons, convertibles, pick-ups, vans, SUVs, AUVs.

Vehicles Not Considered Motor Vehicles

Motorcycles, delivery trucks, dump trucks, buses, road rollers, trolley cars, street sweepers, sprinklers, lawn mowers and heavy equipment such as, but not limited to, bulldozers, payloaders, graders, forklifts, amphibian trucks, cranes, and vehicles which run only on rails or tracks, and tractors, trailers and traction engines of all kinds used exclusively for agricultural purposes.

Nonconformity

Refers to:

a. Any defect or condition that substantially impairs the use, value or safety of a brand new motor vehicle.

b. Which prevents it from conforming to the manufacturer's or distributor's standards or specifications.

c. Which cannot be repaired.

Exclusions from Nonconformity

a. Conditions resulting from noncompliance by the consumer of his or her obligations under the warranty.

b. Modifications not authorized by the manufacturer or distributor.

c. Abuse or neglect.

d. Damage due to accident or force majeure.

Purchase Price

Refers to the invoice price or the amount of money which the dealer or retailer actually received for the brand new motor vehicle, in consideration of the sale of such brand new motor vehicle.

Warranty

Refers to the written assurance, so labeled, of the manufacturer of a brand new motor vehicle including any term or condition precedent to the enforcement of obligations under the warranty.

Warranty Rights Period

Refers to the period provided for under the contract of sale when the manufacturer would guarantee the materials used, the workmanship and the roadworthiness of a brand new motor vehicle for ordinary use or reasonable intended purposes.

Requisites to Invoke Lemon Law Rights

Requisites include:

a. Brand new motor vehicles

b. Purchased in the Philippines

c. Reported by a consumer to be in nonconformity with the vehicle's manufacturer or distributor's standards or specifications.

d. Within twelve (12) months from the date of original delivery to the consumer, or up to twenty thousand (20,000) kilometers of operation after such delivery, whichever comes first.

After At Least Four (4) Separate Repair Attempts

The number of repair attempts to be made to the motor vehicle, before the Lemon Law Rights can be invoked.

True

(True or False) The separate repair attempts shall be made by the same manufacturer, distributor, authorized dealer or retailer for the same complaint.

Notice of Availment

Before availing of any remedy under this Act and subject to compliance with the provisions of Repair Attempts above, the consumer shall, in writing, notify the manufacturer, distributor, authorized dealer or retailer of (1) the unresolved complaint, and (2) the consumer's intention to invoke his or her rights under this Act within the Lemon Law rights period.

True

(True or False) The notice of availment shall be required to be in writing.

Warranty Booklet

Is issued by the manufacturer, distributor, authorized dealer or retailer. It shall clearly state the manner and form of such notice to constitute a valid and legal notice to the manufacturer, distributor, authorized dealer or retailer. It shall also clearly state the responsibility of the consumer.

Availment of Lemon Law Rights

Shall be made subsequent to the filing of notice of availment. The consumer shall bring the vehicle to the manufacturer, distributor, authorized dealer or retailer from where the vehicle was purchased for a final attempt to address the complaint of the consumer to his or her satisfaction.

True

(True or False) It shall be the duty of the manufacturer, distributor, authorized dealer or retailer, upon receipt of the motor vehicle and the notice of nonconformity, to attend to the complaints of the consumer including, as may be necessary, making the repairs and undertaking such actions to make the vehicle conform to the standards or specifications of the manufacturer, distributor, authorized dealer or retailer for such vehicle.

Complaint to the DTI

Shall be made by the consumer in case the nonconformity issue remains unresolved despite the manufacturer, distributor, authorized dealer or retailer's efforts to repair the vehicle, pursuant to the consumer's availment of his or her Lemon Law right.

True

(True or False) If the vehicle is not returned for repair, based on the same complaint, within thirty (30) calendar days from the date of notice of release of the motor vehicle to the consumer following this repair attempt within the Lemon Law rights period, the repair is deemed successful.

True

(True or False) In the event that the nonconformity issue still exists or persists after the thirty (30)-day period but still within the Lemon Law rights period, the consumer may be allowed to invoke his rights under this Act.

Compensation for Non-Use

To compensate the consumer for the non-usage of the vehicle while under repair and during the period of availment of the Lemon Law rights, the consumer shall be provided a reasonable daily transportation allowance, an amount which covers the transportation of the consumer from his or her residence to his or her regular workplace or destination and vice versa.

Compensation for Non-Use

It is a reasonable daily transportation allowance, an amount which covers the transportation of the consumer from his or her residence to his or her regular workplace or destination and vice versa, equivalent to:

a. Air-conditioned taxi fare, as evidenced by official receipt.

b. In such amount to be agreed upon by both parties.

c. A service vehicle at the option of the manufacturer, distributor, authorized dealer or retailer.

True

(True or False) The DTI shall exercise exclusive and original jurisdiction over disputes arising from the provisions of the Lemon Law. All disputes arising from the provisions of this Act shall be settled by the DTI.

True

(True or False) Any cost incurred in establishing the validity of the consumer's complaint shall be borne jointly by the consumer and the manufacturer, distributor, authorized dealer or retailer.

True

(True or False) The complaint shall be deemed valid if it is independently established that the motor vehicle does not conform to the standards or specifications set by the manufacturer, distributor, authorized dealer or retailer.

True

(True or False) Upon failure of the negotiation or mediation between the manufacturer, distributor, authorized dealer, or retailer and the consumer, the parties shall execute a certificate attesting to such failure.

True

(True or False) All disputes that have been submitted for mediation shall be settled not later than ten (10) working days from the date of filing of the complaint with the DTI.

Arbitration

Shall take place in the event there is a failure to settle the complain during the mediation proceedings. It shall be conducted by both the manufacturer and consumer.

Adjudication Proceeding

Shall take place in the event that both parties do not undertake arbitration proceedings. At least one of the parties can initiate this proceeding, to be administered by the DTI.

Twenty (20) Working Days

The maximum number of days adjudication proceedings can take place.

True

(True or False) In case of finding of nonconformity, the DTI shall rule in favor of the consumer and direct the manufacturer, distributor, authorized dealer or retailer to grant either of the following remedies:

a. Replace the motor vehicle with a similar or comparable motor vehicle in terms of specifications and values, subject to availability.

b. Accept the return of the motor vehicle and pay the consumer the purchase price plus collateral damages.

True

(True or False) In case the consumer decides to purchase another vehicle with a higher value and specifications from the same manufacturer, distributor, authorized dealer or retailer, the consumer shall pay the difference in cost.

True

(True or False) In both cases of replacement and repurchase, the reasonable allowance for use, shall be deducted in determining the value of the nonconforming motor vehicle.

True

(True or False) In case a nonconformity of the motor vehicle is not found by the DTI, it shall rule in favor of the manufacturer, authorized dealer or retailer, and direct the consumer to reimburse the manufacturer, distributor, authorized dealer or retailer the costs incurred by the latter in validating the consumer's complaints.

Adjudication Officer

Shall make a final judgement or order which completely disposes of the adjudication case within fifteen (15) days from receipt thereof. The appeal shall be taken by filing a Memorandum of Appeal with the Secretary of the DTI, with Notice of Appeal to the Adjudication Officer, and with a copy duly furnished the adverse party or parties.

True

(True or False) The Secretary of DTI shall decide on the appeal within thirty (30) days from receipt thereof. A party seeking further appeal from the decision of the Secretary of the DTI may file a case for certiorari to the Court of Appeals.

Reasonable Allowance for Use

Whichever is lower between:

a. 20% per annum deduction from the purchase price.

B. Distance traveled in kilometers * purchase price / 100,000 kilometers

Disclosure on Resale

A disclosure to be made, should the returned motor vehicle be made available for resale. It shall be made by the manufacturer, distributor, authorized dealer or retailer prior to the sale or transfer. It shall be disclosed in writing to the next purchaser of the same vehicle the following information:

a. The motor vehicle was returned to the manufacturer, distributor, authorized dealer or retailer.

b. The nature of the nonconformity which caused the return.

c. The condition of the motor vehicle at the time of the transfer to the manufacturer, distributor, authorized dealer or retailer.

True

(True or False) The responsibility of the manufacturer, distributor, authorized dealer or retailer shall cease upon the sale of the affected motor vehicle to the first purchaser.

Minimum Amount of P100,000

The penalty for the manufacturer, distributor, authorized dealer or retailer adjudged to have violated the provisions requiring disclosure.