The exact coverage of lemon laws varies from one jurisdiction to another, but lemon laws uniformly refer to “lemons” as defective products. After numerous bills filed in Congress through the years, the proposed lemon law has been approved by both chambers and on 15 July 2014, President Benigno Aquino signed the Philippine Lemon Law (Republic Act 10642, full text), set to take effect fifteen (15) days from publication [Update: the Philippine Lemon Law took effect on 7 August 2014; see also effectivity and coverage]. While this law directly affects only a small portion of the population, the fact remains that this law covers a major purchase or investment, with the purchase money coming from years of hard work. Let us dissect this new law.
Does the Philippine Lemon Law cover all products?
No. It only covers motor vehicles. A motor vehicle refers 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, sports utility vehicles (SUVs) and Asian Utility Vehicles (AUVs).
It only covers 4-wheeled vehicles, which excludes motorcycles and tricycles (with the proliferation of motorcycles, it’s surprising that motorcycles are excluded from the definition of “motor vehicles”). It only covers road vehicles. It only covers vehicles designed to carry passengers (but buses are explicitly excluded from the coverage), which excludes delivery trucks, dump trucks, 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. (See also Why Motorcycles are not Covered by the Philippine Lemon Law)
Does the Philippine Lemon Law cover all motor vehicles?
Not all motor vehicles are covered by Republic Act No. 10642. It covers only brand new motor vehicles purchased in the Philippines reported by a consumer to be in nonconformity with the vehicle’s manufacturer or distributor’s standards or specifications within the Lemon Law rights period. It obviously doesn’t apply to second-hand vehicles and to brand-new vehicles purchased abroad.
What is a “brand new motor vehicle”?
A motor vehicle is “brand new” if it satisfies ALL of the following criteria: (1) it is constructed entirely from new parts; (2) it is covered, at the time of purchase, by a manufacturer’s express warranty that it has never been sold or registered with the Department of Transportation and Communications (DOTC) or an appropriate agency or authority, and has never been operated on any highway of the Philippines, or in any foreign state or country.
What is the “Lemon Law rights period”?
It is the period ending 12 months after the date of the original delivery of a brand new motor vehicle to a consumer or the first 20,000 kilometers of operation after such delivery, whichever comes first. This is the period during which the consumer can report any nonconformity and pursue any right as provided under the Philippine Lemon Law.
What is “nonconformity”?
Nonconformity refers to any defect or condition that substantially impairs the use, value or safety of a brand new motor vehicle which prevents it from conforming to the manufacturer’s or distributor’s standards or specifications, which cannot be repaired.
Does the Lemon Law cover every nonconformity?
No. Any defect or condition resulting from the following causes are excluded:
1. Noncompliance by the consumer of the obligations under the warranty;
2. Modifications not authorized by the manufacturer, distributor, authorized dealer or retailer;
3. Abuse or neglect of the brand new motor vehicle; and
4. Damage to the vehicle due to accident or force majeure.
When can a consumer invoke his/her rights under the Lemon Law?
Consumers cannot immediately invoke his/her rights. Yes, the consumer can (and must) invoke the rights at any time within the “Lemon Law rights period,” but there must be AT LEAST four (4) separate repair attempts. You’ve heard it right — only when the nonconformity issue remains unresolved after four SEPARATE repair attempts can the consumer invoke his/her rights. And the repairs must be made by the SAME manufacturer, distributor, authorized dealer or retailer for the SAME complaint. [See also Steps in Availing of Consumer Rights under the Philippine Lemon Law]
After 4 repairs, can the consumer already complain with the DTI?
Not yet. The consumer must give the manufacturer, distributor, authorized dealer or retailer a Notice of Availment of Lemon Law Rights. The written notice must contain the unresolved complaint and the consumer’s intention to invoke his/her rights under the Lemon Law.
After the written notice, can the consumer already complain with the DTI?
Not so fast. The consumer must 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. The consumer can proceed to the DTI if the nonconformity issue remains unresolved despite the manufacturer, distributor, authorized dealer or retailer’s efforts to repair the vehicle.
There’s an interesting provision regarding the scenario when the consumer does not return the vehicle 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 effect? The repair is deemed successful. The next sentence, however, provides that 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 avail of the same remedies.
This could mean a number of things. It could mean that if the vehicle is not brought for repairs within 30 days, there is a PRESUMPTION that the repair was successful. All presumptions, however, may be overturned by proof to the contrary. In other words, the consumer may still prove that the repair was not successful, or the vehicle is defective, even beyond the 30-day period. Does this mean that there is a shifting of the burden of proof? Or does the burden of proof is always with the consumer (he who alleges must prove)? It would be interesting to see how the IRR spells out the implications of the 30-day period.
During this stage of repair, will the consumer get any compensation?
The consumer gets a certain amount of compensation for the non-usage of the vehicle while under repair. The manufacturer, distributor, authorized dealer or retailer has the option of providing the consumer with either:
1. a service vehicle, or
2. a reasonable daily transportation allowance.
Any disagreement on the compensation for non-usage shall be resolved by the DTI. There should be some mechanism, like additional penalties, to discourage the potential practice of manufacturers in complicating the compensation-fixing process (which, in turn, will discourage many consumers from claiming this benefit).
How much is the daily transportation allowance?
There is no fixed amount. This is 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 air-conditioned taxi fare, as evidenced by official receipt, or in such amount to be agreed upon by the parties.
Is this non-usage compensation available during the 4-repair minimum?
It seems to apply only to the repair process after the Notice of Availment (which is a notice given only after the initial 4-repair process). Let’s see if the IRR will make this available to the initial 4-repair process (which is unlikely).
Can the consumer go to courts?
For disputes arising from the provisions of the Lemon Law, exclusive and original jurisdiction is exercised by the DTI. Regular courts have no jurisdiction, which means that Lemon Law disputes, if filed in regular courts, will be dismissed.
What are the dispute resolution mechanisms to be followed by the DTI?
The law provides for three (3) dispute resolution mechanisms in resolving disputes under the Philippine Lemon Law — mediation, arbitration and adjudication.
What are the remedies to consumers?
In case of nonconformity, and there is a finding to such effect by the DTI, the manufacturer, distributor, authorized dealer or retailer shall be given the following options:
1. Replacement. The motor vehicle shall be replaced with a similar or comparable motor vehicle in terms of specifications and values, subject to availability. 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.
2. Repurchase. The manufacturer, distributor, authorized dealer or retailer shall accept the return of the motor vehicle and pay the consumer the purchase price plus the collateral charges. Collateral charges refer to the fees paid’ to the Land Transportation Office (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.
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.
What if the DTI finds that vehicle is not defective?
Then the consumer has a problem. In case a nonconformity of the motor vehicle is not found by the DTI, it shall rule in favor of the manufacturer, distributor, .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. While this is fair to discourage frivolous claims, it still has the effect of discouraging some consumers from enforcing their rights. The manufacturer, of course, would have no problem spending because it’s an expense deducted from taxes. It’s simply an expense item in its books. For the consumer, it’s a big dent on his/her budget.