Law News

'I bought a lemon'

This is an expression commonly used when a customer buys or purchases a defective or worthless item from a seller, manufacturer or distributor. It was in 1982 when the first “Lemon Law” was passed in the United States by the Connecticut State legislature in response to an increasing number of complaints concerning the purchase of defective new automobiles ( ).

In the Philippines, the Lemon Law was passed in 2014 to promote the full protection of the rights of consumers against business and trade practices in the sale of motor vehicles which are deceptive, unfair or otherwise inimical to consumers and the public (Section 2, Republic Act No.10642). It also recognized that a motor vehicle is a major consumer purchase or investment. Hence, the rights of consumers should be clearly defined, including the means for redress of their grievances (Section 2, Republic Act No.10642).

The purchasing of a motor vehicle and treatment as a personal investment began sometime in the early 90s when Metro Manila traffic conditions deteriorated due to the construction of numerous flyovers. First among this was the EDSA-corner-Ortigas Avenue flyover. It was then that the odd-even scheme, which would later evolve to the present number coding scheme, was first introduced. Burdened by these circumstances, some were forced to purchase motor vehicles to make sure that they were comfortable despite being stuck in traffic for hours.

It was also at this time when new car brands were introduced into the market, effectively putting more cars onto the streets. Decades passed with no government program for phasing out motor vehicles, which together with the continuous influx of thousands of new cars to our city roads exacerbated the conditions ( Middle-class consumers who wanted to circumvent the number-coding rule or avoid difficulty finding a seat aboard public vehicles during rush hour on the days their cars are “coding” found a ready solution by buying another car.

With motor vehicles becoming a necessity and now more affordable, consumer complaints increased due to claims of faulty and substandard brand-new motor vehicles. Prior to the passage of the Lemon Law of the Philippines, consumer complaints on brand-new motor vehicles were primarily founded on the Consumer Protection Act of the Philippines and the Civil Code of the Philippines. A 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 Communications (Section 3 (a), Republic Act No.10642).

The Lemon Law covers only brand-new motor vehicles purchased in the Philippines reported by a consumer not to be in conformity with the vehicle’s manufacturer or distributor’s standards or specifications 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. Despite the car’s brand new nature, it will not be covered by the Lemon Law if there is: (a) non-compliance by the consumer of the obligations under the warranty; (b) modification not authorized by the manufacturer, distributor, authorized dealer or retailer; (c) abuse or neglect of the brand new motor vehicle; and (d) damage to the vehicle due to accident or force majeure (Section 4, Republic Act No.10642).

At any time within the Lemon Law rights period, and after at least four (4) separate repair attempts to correct the same complaint and the issue remains unresolved, the consumer may invoke his or her rights under the law. The repair may include replacement of parts components, or assemblies (Section 5, Republic Act No.10642). Before availing himself or herself of the remedies and subject to compliance with the provisions of repairs, the consumer shall, in writing, notify the manufacturer, distributor, authorized dealer or retailer of the unresolved complaint, and the consumer’s intention to invoke his or her rights under the law within the Lemon Law rights period (Section 6, Republic Act No.10642).

With the filing of the 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. It shall be the duty of the manufacturer, distributor, authorized dealer or retailer, upon receipt of the motor vehicle 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 its standards or specifications for the vehicle (Section 7, Republic Act No.10642).

In case the nonconformity issue remains unresolved despite the efforts to repair the vehicle, pursuant to the consumer’s availment of his or her Lemon Law rights, the consumer may file a complaint before the Department of Trade and Industry. However, if the vehicle is not returned for repair; based on the same complaint, within thirty calendar days from the date of notice of release of the motor vehicle to the consumer following this repair attempt, then the repair is deemed successful. In case the nonconformity issue still persists after the thirty-day period but still within the Lemon Law rights period, the consumer may still be allowed to avail of the same remedies for the repairs (Section 7, Republic Act No.10642).

To compensate 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. The transportation allowance will be equivalent to air-conditioned taxi fare, as evidenced by official receipt, or in such amount to be agreed upon by the parties; or a service vehicle at the option of the manufacturer, distributor, authorized dealer or retailer (Section 7, Republic Act No.10642).

In the event that the nonconformity issue persists and the parties cannot resolve their dispute, the DTI shall exercise exclusive and original jurisdiction over the controversies. All said disputes shall be settled by the DTI in accordance with the following dispute resolution mechanisms: (a) mediation; (b) arbitration; or adjudication. In the course of the mediation, the DTI shall endeavor to establish the validity of the consumer’s complaint. The parties may voluntarily decide to undertake arbitration proceedings if they fail to settle during the mediation proceedings (Section 8 (a) and (b), Republic Act No.10642).

Should the parties decide not to undertake arbitration proceedings at least one of the parties may commence adjudication proceedings with the DTI. (Section 8 (c), Republic Act No.10642). In case DTI rules in favor of the consumer, it may direct the manufacturer, distributor, authorized dealer or retailer to grant either of the following remedies to the consumer: (i) replace the motor vehicle with a similar or comparable motor vehicle in terms of specifications and values, subject to availability; or (ii) accept the return of the motor vehicle and pay the consumer the purchase price plus the collateral charges (Section 8 (c)(2), Republic Act No.10642)..

If 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. On the other hand, if DTI rules in favor of the manufacturer, distributor, authorized dealer or retailer, the consumer will be directed to reimburse the manufacturer, distributor, authorized dealer or retailer the costs it incurred in validating the consumer’s complaints (Section 8 (c)(3), Republic Act No.10642)..

As consumers, we can always purchase anything that we desire that is within our means. However, we have to be cautious when we part with our hard earned money since once turned over, it will be hard to recover. This becomes even worse if we get a “lemon item” in exchange for it. While we may have a safe harbor on consumer laws it is best not to find a need to utilize it.

By: Atty. Tranquil G.S. Salvador III

This article was originally published by Manila Standard.