FIFTEENTH CONGRESS )
OF THE REPUBLIC OF THE PHILIPPINES )
First Regular Session )

HOUSE OF REPRESENTATIVES

352

House Bill No.

Introduced by Representative Susan A. Yap

EXPLANATORY NOTE,

Consumer welfare is a primary concern in commerce, as protection of the consuming
public raises quality standards of products and services, naturally boosting the economy,

There are few properties that are as important, both symbolically and in practical
application, as a motor vehicle. For an average family, the purchase of such requires large
savings made possible by blood, sweat and tears exhausted in one’s occupation.

Needless to say, there must be a certain level of guarantee in the vehicle’s investment.
The warranties available for vehicles do not allow the return of a defective vehicle with
recurring problems, but only continued repairs, that is, until the warranty period expires.
Buyers are at tisk of being left with a hunk of junk, or a “lemon,” while car manufacturers
and dealers find business elsewhere, perhaps from another unwitting victim.

Many Filipinos have been victimized by false warranties and they cannot resort to legal
remedies because of the absence of a law addressing their concerns. This bill secks to
promote full protection to the rights of consumers in the sale of motor vehicles against sales
and trade practices which are deceptive, unfair, or otherwise inimical to consumers and the
public interest. It recognizes that a motor vehicle is 2 major consumer investment, defines
the rights of the buyer and imposes penalties for violations thereof.

‘The bill proposes a one (1) year period in which buyers of brand-new vehicles can
avail of the provisions of this “Lemon Law,” which allows up to four repairs on the same
defect before a replacement or refund of the vehicle can be claimed. If a consumer happens
to buy a defective car or any other product, he or she is entitled to get his or her money
back, or to at least get a prompt replacement, thereby ensuring that car buyers get full value
for their money.

‘This bill has been thoroughly deliberated during the 13th and 14th Congress, and it is
my fervent hope that we manage to finally enact this proposal into law.

SUSAN A.,
Representative, 2 Digyfict 5f Tarlac


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FIFTEENTH CONGRESS )
OF THE REPUBLIC OF THE PHILIPPINES )

First Regular Session )

HOUSE OF REPRESENTATIVES
House Bill No. 352

Introduced by Representative A. Yap

AN ACT
STRENGTHENING CONSUMER PROTECTION IN THE PURCHASE OF
BRAND NEW MOTOR VEHICLES AND FOR OTHER PURPOSES.

Be it enacted by the Senate and House of Representatives of the Philippines in Congress assembled:

SECTION 1, Short Title, This Act shall

be known as the “Lemon Law of 20/0"

SUC. 2. Declaration of Policy. - \t ws \ py declared the policy of the State to promote
full protection to the rights of consumers in the sale of motor vehicles against sales and trade

practices which are deceptive, unfair or oth

ise inimical to the consumers and the public
imierest, The State recognizes that a motor yebicle is a major consumer purchase or
investment. ‘The consumer rights should thus be clearly defined including the means for

redress for violations thereof.

SEC. 3. Definition of Terms. - For puxposes of this Act, the following terms shall

mean:

Brand new motor vehicle” refers to a vehicle constructed entirely from new parts
that has never been sold or registered with the Department of Transportation and

Communications (DOTC) or an appropriate a;

ney or authority and operated on the highway

of the Philippines, or in a foreign state or country

(b) “Collateral charges” refers to the fees paid to the Land Transportation Office (LTO)

for the registration of a brand new motor vehicle and other incidental expenses, including the


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cof insurance pertaining to the said vehicle

(6) 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, That there shall be

an offset from this value for reasonable allowance for its use.

(a)

Consumer” refers to any person, natural or juridical, who is a purchaser, either by

cash or credit, of a brand new motor vehicle.

(6) “Dealer” or “Seller” refers to any person other than a manufacturer who sells motor

vehicles to the public

(f) “Determination of reasonable allowance for use”, for purposes of this Act,

“reasonable allowance for use” shall mean twen

» percent (20%) per annum deduction from

the purchase price, or the product of the distince traveled in kilometers and the purchase

price divided by one hundred thousand (P100,000.00), whichever is higher

) “Distributor” refers to any person os entity other than a marufacturer who sells

brand new motor vehicles to their duly authorized dealers or retaile:

(h) “Implementing agency” refers to the Department of Trade and Industry (DTI)

(i) “Lemon Law rights period” refers to the period ending ewelve (12) months after the

date of the original delivery of a brand new motor vehicle to a consumer or the first twenty

thousand (20,000) kilometers of operation after such delivery, whichever comes first. This

shall be the period during which the consumer can report any non-conformity, as defined in
paragraph (k) herein, to the standards and specifications of the manufacturer, distributor,

authorized dealer of retailer, and pursue any right provided for under this Act

@) “Manufacturer” refers to a person, pa

tship, association, corporation or entity

engaged in the business of manufacturing or assembling motor vehicles, or of distributing,


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motor vehicles to motor vehicle dealers.

k) “Motor vehicle” refers to any self-propelled four (4)-wheeled road vehicle designed

to carty passengers including, bur not limited 10, sedans, coupes, station wagons, convertibles,

pickups, vans, sport utility vebicles (SUVs) and Asian utility vehicles (AUVs) bur excepting

motoreycles, deli

y trucks, dump crucks, buses, road rollers, trolley cars, street sweepers,

wn mowers and h

sprinklers, y equipment, such as, but not limited 10, bulldozers,

payloaders, graders, forklifts, amphibian trucks, cranes and vehicles which run only on rails or

tracks, and tractors, trailers and traction of all kinds us

d exclusively for agricultural

ail

purposes. ‘T having any number of wheels, when propelled or intended by attachment to

a motor vehicle, shall be classified as separate motor vehicle with no power rating,

(1) “Non-conformity” 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, but

excluding conditions tesulting from non

mpliance by the consumer of his obligations under

the wa

amy, modifications not authorized by the manufacturer or distributor, abuse of

neglect, and damage due to accident or forve nujenre.

m) “Purchase price” refers to the

woice 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.

(n) “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

obbyations under the warranty

(oN

ranty rights period” refers to the period provided for under the contract of sale

when the manufacturer would guarantee the materials used, workmanship and roadworthiness

of a brand new motor vehicle for ordinary use or reasonable intended purposes.


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4. Coverage. - This Act shall cover brand new motor vehicles with non-
conformity reported by the consumer within owelve (12) months from the date of original
delivery to the consumer or qwenty thousand (20,000) kilometers of operation after such

delivery, whichever comes first. The following causes of non-conformity shall be excluded:
(a) Noncompliance by the consumer of his obligations under the warranty;

(b) Modifications not authorized by the manufacturer or distributor:

(c) Abuse or neglect of the brand new motor vehicle; and

(@) Damage to the vehicle due to an accident ot jarve majeure.

SEC. 5. Repair Attempts. - At any time within the Lemon Law rights period and after

at least four (4) separate repair attempts by the same dealer- manufacturer for the same

complaint, the consumer, if still unsatisfied with the results of the said repairs, may invoke his

rights under this Act

SE

6, Notice of Availment of the Lemon Law Rights. - Before availing of any
remedy under this Act and subject to compliance with the provisions of Section 5 hereof, 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 rights under this Act

within the Lemon Law tights period.

‘The warranty booklet issued by the manufacturer, distributor, authorized dealer or
retailer shall clearly state the responsibility of the consumer under this section. It shall likewise
provide the manner and form of such notice to constitute a valid and legal notice to the

manufacturer, distributor, authorized dealer or retailer.

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. ?. Availment of the Lemon Law Rights. - Subsequent to the filing of the notice
of availment referred to in the preceding section, the consumer shall bring the vehicle to the

dealer from which the vehicle

purchased for a final attempt to address the consumer's


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complaints to his satisfaction.

It shall be the dary of the manufacturer, distributor, authorized dealer or retailer, upon

receipt of the motor vehicle and the notice of non-conformity required under Section 6

hereof, to attend ro 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 or distributor for such vehicle.

In case the consumer rev

ins un

isfied with the dealer manufacturer's efforts to repait

the vehicle, pursuant to the consumer's availment of his Lemon Law rights, the consumer may

file a complaint before the DTI as provided for under this Act: Provided, however, That if the

vehicle is not returned for repair based on the same complaint within thirty (30) calendar da

from the date of notice of release of the motor vehicle to the consumer following this repair

atvempr within the Lemon Law tights period, the repair is deemed successful: Provided, finally,

Uhat, in the event the consumer still remains unsatisfied after the thirty (30) days period but

sul within the Lemon Law sights period, the consumer may be allowed to avail of the same

remedies under Sections 5 and 6 hereof,

To compensate for the non-usage of the vehicle while under repair and during the
petiod of availment of the Lenion Law rights, che consumer shall he 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 and vive rersay equivalent to air

conditioned taxi fare of in such amount to be agreed upon by the parties, or a service vehicle

at the option of the manufacturer, distributor, authorized dealer ot retailer. Any disagreement

on this matter shall be resolved by the implementing agency provided for under this Act.

‘othing herein shall be constra

d to limit or impair the rights and remedies of

consumer under any other law.

SEC. 8. Remedies for Dispute Resolution - The DTI shall exercise exclusive and

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original jurisdiction over disputes arising from the provisions of this Act. All disputes arising
from the provisions of this Act shall be settled by the DTI in accordance with the following,

dispute resolution mechanisms:

(a) Mediation

(1) The principles of negotiation, con

jation and mediation towards amicable
settlement between the manufacturer or distributor and the consumer shall be strictly

observed;

(2) In the course of its dispute resolution efforts, the DTI shall endeavor to
independently establish the validity of the consumer's outstanding complaint, The DT shall
likewise retain the services of other government agencies or independent private entities in the

ascertainment of the

dity of the consumer's complaint. Any cost incurred in establishing

the validity of the consumer's

omplaint shall be borne jointly by the consumer and the dealer

manufacturer:

(3) The complaint shall be deemed valid is independently established thar the

vehicle does not conform to the standards or specifications set by the manufacturer;

(4) Upon failure of the negotiation or mediation between the manufacturer or

distributor and the consumer, the parties shall execute a certificate attes

ng to such failure;

and

y time during the dispute resolution period, the manufacturer or

-d co settle amicably,

distributor and the consumer shall be encouray

All disputes that have been submitted for mediation shall be settled not later than forty:

five (45) working days from the date of filing of the complaint with the DTL

(b) Arbitration


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(1) In the event there is a failure 10 seule the complaint during the mediation

proceedings, the parties may volunrarily enter into arbitration proceedings, likewise to be

supe

ised by the DT1. The DT shall rely on the independent findings as to conformity to

standards and specifications established herein;

(2) In case a non-conformity of the vehicle is found by the DTI, it shall rule in favor of
the consumer and direet the dealer-manufactures 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

Gi) Accept the return of the motor vehicle and pay the consumer the purchase price plus

collateral charges,

In case the consumer decides to purchase another vehicle with a higher value and
specifications from the same dealer-manufactures, the consumer shall pay the difference in

cost

In both cases of replacement and repurchase, the reasonable allowance for use, as

defined in this Act, shall be deducted in dete

pining the value of the non-conforming vehicle;

and

(3) In case a non-conformity of the vehicle is not found by the DTI, it shall rule in favor

of the dealer-manufacturer and direc!

the consumer to reimburse the dealer-manufacturer the

costs incuered by the latter in validating the consumes’s complaints

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9, Determination of Reasonable Allowance for Use. ~ Por purposes of this Act,

“reasonable allowance for use” shall mean twenty percent (20%) per anaum deduction from
the purchase price, or the product of the distance traveled in kilometers and the purchase

price divided by one hundred thousand (100,00), whichew

is higher.


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10. Disclosure on Resale. - Should the rewrned vehicle be made available for

resale, the manufacturer or distributor shall, prior to sale, lease or transfer, disclose 10 the

dealer in writing that:

(a) the motor vehicle was returned to the manufacturer, distributor, factory or branch;

(b) the nature of the non-conformity which caused the return; and

(c) the condition of the motor vehicle at the time of the transfer to the dealer.

It shall be the responsibility of the dealer 16 make the same disclosure in writing, in turn,
to the next purchaser prior to sale. The cesponsibility of the dealer under this section shall

cease upon the sale of the affected motor vehicle to the first purchaser.

SEC. 11. Penalty. “The manufacturer, distributor or dealer adjudged to have violated

the provisions requiring disclosure as mentioned in the preceding section shall be liable to pay

4 minimum amount of One hundred thousand pesos (Php 100,000.00) as damages to the

aggrieved party without prejudice to any civil or criminal liability they and/or the responsible

officer may incur under existing laws,

SEC. 12. Assistance by Other Agencies. - The DOTC and other agencies, political
subdivisions and local government units, including government-owned and -controlled
corporations, shall render such assistance as required by the D'T in order to effectively

unplement the provisions of this Act.

SEC. 13. Implementing Rules and Regulations. - The DVI shall promulgate the
necessary implementing rules and regulations within ninety (90) days from the effectivity of

this Act

SEC. 14. Separability Clause. - If, for any reason, any part or provision of this Act is

declared invalid, such declaration shall not affect the other provisions of this Act.


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5. Repealing Clause. - Si law

decrees,

secutive orders, issuances, rules or

regulations of parts thereof which are inconsistent with the provisions of this Act are hereby

deemed repealed, amended or modified accordingly

SEC. 16. Effectivity - This Act shall take effect fifteen (15) days after its publication in

the Offi

1 Gazette. ot in two (2) national newspapers of general circulation

Approved,

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