Law 006 Regulatory Framework and Legal Issues in Business

Philippine Lemon Law

REPUBLIC ACT NO. 10642 refers to the period ending twelve (12)
AN ACT STRENGTHENING CONSUMER PROTECTION IN THE months after the date of the original delivery
PURCHASE OF BRAND NEW MOTOR VEHICLES of a brand- new motor vehicle to a consumer
Be it enacted by the Senate and House of Representatives of the or the first twenty thousand (20,000)
Philippines in Congress assembled: kilometers of operation after such delivery,
Section 1 (h) Lemon Law whichever comes first. This shall be the
rights period period during which the consumer can
Short Title report any nonconformity, as defined in
• This Act shall be known as the "Philippine Lemon Law". paragraph (k) herein, to the standards and
Section 2 specifications of the manufacturer,
authorized distributor, authorized dealer or
Declaration of Policy
retailer, and pursue any right as provided for
• It is hereby declared the policy of the State to promote full protection under this Act
to the rights of consumers in the sale of motor vehicles against refers to any person, natural or juridical,
business and trade practices which are deceptive, unfair or (i) Manufacturer engaged in the business of manufacturing
otherwise inimical to consumers and the public interest. or assembling motor vehicles
• The State recognizes that a motor vehicle is a major consumer refers to any self-propelled, four (4) wheeled
purchase or investment. Hence, the rights of consumers should be road vehicle designed to carry passengers
clearly defined, including the means for redress for violations including, but not limited to, sedans,
thereof. coupes, station wagons, convertibles, pick-
Section 3 ups, vans, sports utility vehicles (SUVs) and
Definition of Terms Asian Utility Vehicles (AUVs) but excluding
As used in this Act: motorcycles, delivery trucks, dump trucks,
refers to a vehicle constructed entirely from buses, road rollers, trolley cars, street
new parts and covered by a manufacturer’s sweepers, sprinklers, lawn mowers and
express warranty at the time of purchase that (j) Motor vehicle heavy equipment such as, but not limited to,
(a) Brand new it has never been sold or registered with the bulldozers, payloaders, graders, forklifts,
motor vehicle Department of Transportation and amphibian trucks, cranes, and vehicles
Communications (DOTC) or an appropriate which run only on rails or tracks, and
agency or authority, and has never been tractors, trailers and traction engines of all
operated on any highway of the Philippines, or kinds used exclusively for agricultural
in any foreign state or country purposes. Trailers having any number of
wheels, when propelled or intended by
(b) Collateral refer to the fees paid’ to the Land
attachment to a motor vehicle, shall be
charges Transportation Office (LTO) for the
classified as separate motor vehicle with no
registration of a brand new motor vehicle and
power rating
other incidental expenses such as, but not
limited to, the cost of insurance pertaining to (k) Nonconformity refers to any defect or condition that
the vehicle, chattel mortgage fees and interest substantially impairs the use, value or safety
expenses if applicable of a brand new motor vehicle which
prevents it from conforming to the
(c) Comparable refers to a motor vehicle that is identical or
manufacturer’s or distributor’s standards or
motor vehicle reasonably equivalent to the motor vehicle to
specifications, which cannot be repaired,
be replaced, in terms of specifications and
but excluding conditions resulting from
values, subject to availability, as the motor
noncompliance by the consumer of his or
vehicle existed at the time of
her obligations under the warranty,
purchase: Provided, That there shall be an
modifications not authorized by the
offsetting from this value for reasonable
manufacturer or distributor, abuse or
allowance for its use
neglect, and damage due to accident
(d) Consumer refers to any person, natural or juridical, who
or force majeure
purchases a brand new motor vehicle either
(l) Purchase price refers to the invoice price or the amount of
by cash or credit from an authorized
money which the dealer or retailer actually
distributor, dealer or retailer in the Philippines
received for the brand new motor vehicle, in
(e) Dealer or refers to any person, natural or juridical,
consideration of the sale of such brand new
retailer authorized by the manufacturer or distributor
motor vehicle
to sell brand new motor vehicles directly to the
(m) Warranty refers to the written assurance, so labeled,
retail buyers and the public
of the manufacturer of a brand new motor
(f) Distributor refers to any person, natural or juridical,
vehicle including any term or condition
authorized by the manufacturer to sell brand
precedent to the enforcement of obligations
new motor vehicles to duly authorized dealers
under the warranty
or retailers
(n) Warranty refers to the period provided for under the
(g) Implementing refers to the Department of Trade and contract of sale when the manufacturer would
rights period
agency Industry (DTI), reorganized under Title X, guarantee the materials used, the workmanship
Book IV of Executive Order No. 292, series of and the roadworthiness of a brand new motor
1987, otherwise known as the "Administrative vehicle for ordinary use or reasonable intended
Code of 1987"; purposes.
Law 006 Regulatory Framework and Legal Issues in Business
Philippine Lemon Law
Section 4 following this repair attempt within the Lemon Law rights period, the
repair is deemed successful:
Coverage • Provided, finally, That, in the event that the nonconformity issue still
• This Act shall cover brand new motor vehicles purchased in the exists or persists after the thirty (30)-day period but still within the
Philippines reported by a consumer to be in nonconformity with the Lemon Law rights period, the consumer may be allowed to avail of
vehicle’s manufacturer or distributor’s standards or specifications the same remedies under Sections 5 and 6 hereof.
within twelve (12) months from the date of original delivery to the • To compensate for the non-usage of the vehicle while under repair
consumer, or up to twenty thousand (20,000) kilometers of and during the period of availment of the Lemon Law rights, the
operation after such delivery, whichever comes first. consumer shall be provided a reasonable daily transportation
The following causes of nonconformity shall be excluded: allowance, an amount which covers the transportation of the
• (a) Noncompliance by the consumer of the obligations under the consumer from his or her residence to his or her regular workplace
warranty; or destination and vice versa, equivalent to air-conditioned taxi fare,
• (b) Modifications not authorized by the manufacturer, distributor, as evidenced by official receipt, or in such amount to be agreed
authorized dealer or retailer; upon by the parties, or a service vehicle at the option of the
• (c) Abuse or neglect of the brand new motor vehicle; and manufacturer, distributor, authorized dealer or retailer. Any
• (d) Damage to the vehicle due to accident or force majeure. disagreement on this matter shall be resolved by the DTI.
Section 5 • Nothing herein shall be construed to limit or impair the rights and
remedies of a consumer under any other law.
Repair Attempts
Section 8
• At any time within the Lemon Law rights period, and after at least
four (4) separate repair attempts by the same manufacturer, Remedies for Dispute Resolution
distributor, authorized dealer or retailer for the same complaint, and • The DTI shall exercise exclusive and original jurisdiction over
the nonconformity issue remains unresolved, the consumer may disputes arising from the provisions of this Act. All disputes arising
invoke his or her rights under this Act. from the provisions of this Act shall be settled by the DTI in
• The repair may include replacement of parts components, or accordance with the following dispute resolution mechanisms:
assemblies. • (a) Mediation
Section 6 (1) The principles of negotiation, conciliation and mediation towards
amicable settlement between the manufacturer, distributor,
Notice of Availment of Lemon Law Rights authorized dealer or retailer and the consumer shall be strictly
• Before availing of any remedy under this Act and subject to observed;
compliance with the provisions of Section 5 hereof, the consumer (2) In the course of its dispute resolution efforts, the DTI shall
shall, in writing, notify the manufacturer, distributor, authorized endeavor to independently establish the validity of the consumer’s
dealer or retailer of the unresolved complaint, and the consumer’s outstanding complaint. The DTI shall likewise retain the services of
intention to invoke his or her rights under this Act within the Lemon other government agencies or qualified independent private entities
Law rights period. in the ascertainment of the validity of the consumer’s complaint. Any
• The warranty booklet issued by the manufacturer, distributor, cost incurred in establishing the validity of the consumer’s complaint
authorized dealer or retailer shall clearly state the manner and form shall be borne jointly by the consumer and the manufacturer,
of such notice to constitute a valid and legal notice to the distributor, authorized dealer or retailer;
manufacturer, distributor, authorized dealer or retailer. It shall also (3) The complaint shall be deemed valid if it is independently
clearly state the responsibility of the consumer under this section. established that the motor vehicle does not conform to the
standards or specifications set by the manufacturer, distributor,
Section 7
authorized dealer or retailer;
Availment of Lemon Law Rights (4) Upon failure of the negotiation or mediation between the
• Subsequent to filing the notice of availment referred to in the manufacturer, distributor, authorized, dealer or retailer and the
preceding section, the consumer shall bring the vehicle to the consumer, the parties shall execute a certificate attesting to such
manufacturer, distributor, authorized dealer or retailer from where failure; and
the vehicle was purchased for a final attempt to address the (5) At any time during the dispute resolution period, the
complaint of the consumer to his or her satisfaction. manufacturer, distributor, authorized dealer or retailer and the
• It shall be the duty of the manufacturer, distributor, authorized dealer consumer shall be encouraged to settle amicably. All disputes that
or retailer, upon receipt of the motor vehicle and the notice of have been submitted for mediation shall be settled not later than ten
nonconformity required under Section 6 hereof, to attend to the (10) working days from the date of filing of the complaint with the
complaints of the consumer including, as may be necessary, making DTI.
the repairs and undertaking such actions to make the vehicle • (b) Arbitration
conform to the standards or specifications of the manufacturer, In the event there is a failure to settle the complaint during the
distributor, authorized dealer or retailer for such vehicle. mediation proceedings, both parties may voluntarily decide to
• In case the nonconformity issue remains unresolved despite the undertake arbitration proceedings.
manufacturer, distributor, authorized dealer or retailer’s efforts to • (c) Adjudication
repair the vehicle, pursuant to the consumer’s availment of his or (1) In the event that both parties do not undertake arbitration
her Lemon Law rights, the consumer may file a complaint before the proceedings, at least one of the parties may commence adjudication
DTI as provided for under this Act: proceedings, administered by the DTI. The DTI shall rely on the
• Provided, however, That if the vehicle is not returned for repair, qualified independent findings as to conformity to standards and
based on the same complaint, within thirty (30) calendar days from specifications established herein. In no case shall adjudication
the date of notice of release of the motor vehicle to the consumer proceedings exceed twenty (20) working days;
(2) In case a finding of nonconformity is arrived at, the DTI shall rule
in favor of the consumer and direct the manufacturer, distributor,
Law 006 Regulatory Framework and Legal Issues in Business
Philippine Lemon Law
authorized dealer or retailer to grant either of the following remedies Section 11
to the consumer:
(i) Replace the motor vehicle with a similar or comparable Penalty
motor vehicle in terms of specifications and values, subject • The manufacturer, distributor, authorized dealer or retailer adjudged
to availability; or to have violated the provisions requiring disclosure as mentioned in
(ii) Accept the return of the motor vehicle and pay the the preceding section shall be liable to pay a minimum amount of
consumer the purchase price plus the collateral charges. One hundred thousand pesos (P100,000.00) as damages to the
• In case the consumer decides to purchase another vehicle with a aggrieved party without prejudice to any civil or criminal liability they
higher value and specifications from the same manufacturer, and/or the responsible officer may incur under existing laws.
distributor, authorized dealer or retailer, the consumer shall pay the Section 12
difference in cost.
• In both cases of replacement and repurchase, the reasonable Assistance by Other Agencies
allowance for use, as defined in this Act, shall be deducted in • The DOTC and other agencies, political subdivisions, local
determining the value of the nonconforming motor vehicle; and government units, including government-owned and/or controlled
corporations, shall render such assistance as required by the DTI in
(3) In case a nonconformity of the motor vehicle is not found by the order to effectively implement the provisions of this Act.
DTI, it shall rule in favor of the manufacturer, distributor, authorized Section 13
dealer or retailer, and direct the consumer to reimburse the
manufacturer, distributor, authorized dealer or retailer the costs Implementing Rules and Regulations
incurred by the latter in validating the consumer’s complaints. • The DTI shall promulgate the necessary implementing rules and
• An appeal may be taken from a final judgment or order of the regulations within, ninety (90) days from the effectivity of this Act.
Adjudication Officer which completely disposes of the case within Section 14
fifteen (15) days from receipt thereof. The appeal shall be taken by
filing a Memorandum of Appeal with the Secretary of the DTI, with Separability Clause
Notice of Appeal to the Adjudication Officer, and with a copy duly If, for any reason, any part or provision of this Act is declared invalid,
furnished the adverse party or parties on any of the following such declaration shall not affect the other provisions of this Act.
grounds: Section 15
(i) Grave abuse of discretion
Repealing Clause
(ii) The decision/order is in excess of jurisdiction or authority
of the Adjudication Officer; and • All laws, decrees, executive orders, issuances, rules and
(iii) The decision/order is not supported by the evidence or regulations or parts thereof which are inconsistent with the
there is serious error in the findings of facts. provisions of this Act are hereby deemed repealed, amended or
• The Secretary of the DTI shall decide on the appeal within thirty (30) modified accordingly.
days from receipt thereof. A party seeking further appeal from the Section 16
decision of the Secretary of the DTI may file a case for certiorari to
Effectivity
the Court of Appeals under Section 4, Rule 65 of the Revised Rules
of Court. • This Act shall take effect fifteen (15) days after its publication in
the Official Gazette or in any newspaper of general circulation.
Section 9
Determination of Reasonable Allowance for Use
• For purposes of this Act, "reasonable allowance for use" shall mean
twenty percent (20%) per annum deduction from the purchase
price, or the product of the distance traveled in kilometers and the
purchase price divided by one hundred thousand (100,000)
kilometers, whichever is lower.
Section 10
Disclosure on Resale
• Should the returned motor vehicle be made available for resale, the
manufacturer, distributor, authorized dealer or retailer shall, prior to
sale or transfer, disclose 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; and
(c) The condition of the motor vehicle at the time of the
transfer to the manufacturer, distributor, authorized dealer
or retailer.
• The responsibility of the manufacturer, distributor, authorized dealer
or retailer under this section shall cease upon the sale of the
affected motor vehicle to the first purchaser.