FOURTEENTH CONGRESS OF THE REPUBLIC) 
OF THE PHILIPPINES 
) 
Third Regular Session 
~. 
9 
NOV 18 i' 1 :3' 
SENATE 
S.B. No.3540 
EXPLANATORY NOTE 
The Constitution, Article 16, Section 9 states that: 
The State shall protect consumers from trade malpractices and from 
substandard or hazardous products. 
., ..: 
A "lemon" is a term used to describe a defective car that is found to have numerous or 
severe defects not readily apparent before its purchase. Such a defect substantially impairs its 
use, value, or safety. If the car has been repaired four. or more times for the same defect within 
, 
the warranty period and the defect has not been fixed, the car qualifies as a lemon. The United 
States has several federal and state laws called "lemon laws," to protect consumers. Lemon 
laws provide a remedy for purchasers of cars that repeatedly fail to meet standards of quality and 
performance. 
In the Philippines, the purchase of a new car ~sually carries a manufacturer's warranty. 
On the other hand, vendors of used cars do not usually issue any express warranty. A "used car", 
also known as a pre-owned vehicle and second hand car, is a vehicle that has previously had one 
or more owners. Used cars are usually sold through car dealers, leasing companies, auctions and 
private party sales. 
Since brand new cars are still considered prohibitive for the middle class, many resort to 
purchasing used cars. Unfortunately, without mechanical expertise, buyers cannot easily 
distinguish which used cars have defects. Vendors are not required to disclose the history of the 
cars they sell. Thus, many used cars though seemingly in good running condition, could have 
been improperly maintained or poorly repaired, been 'unprofessionally rebuilt after a collision or 
tampered with in some manner to conceal highmileilge, mechanical defects, corrosion or other 
I 


damage. For example, many vendors of cars that have undergone a flood do not disclose such 
., 
information to their buyers. 
This bill seeks to protect consumers who buy us,ed vehicles from a dealer or private party. 
It requires dealers to provide consumers with a written warranty against defects that impair the 
vehicle's use or safety, and requires private parties to disclose any known use or safety defects. 
Dealer warranties cannot be waived under any circumstances. The dealer must give a 
signed, dated, correct copy of the limited used vehicl~ warranty at the time you purchase the 
vehicle. The warranty requires the dealer to repair any defect that impairs the vehicle's use or 
safety. The coverage depends on the mileage of the vehicle at the time of purchase as outlined 
below: 
Mileage 
Warranty Period 
Less than 64,500 km. 
90 days or 6,035 km., whichever comes first 
64,500 to 128,746km. 
60 days or 4,023 km., whichever comes first 
, 
.~ .. 
128,747 to 201,167 km 
30 days or 2,012 km" whichever comes first 
r'"-~~~~ 
201,168 km. or over 
INo express 
If the true mileage of the vehicle is unknown at the time of the sale, the warranty period 
is calculated according to the age ofthe vehicle as outlined below: 
Age of Vehicle 
"'"" 
"' 
3 years old or less 
More than 3 and less than 6 years old 
More than 6 years old 
Warranty Period 
days or 6,035 km., whichever comes first 
days or '4,023 km., whichever comes first 
_. , "  
,." " 
"M 
• 
or';2,012 km., whichever comes first 
Though our country allows private enterprises and individuals to enter into contracts 
freely, the state should come in when necessary to protect the interests of the consumer, promote 
his general welfare and establish standards of conduct ~or business and industry. 
, 
~';;. D%rSotsJ(~ 
2 


FOURTEENTH CONGRESS OF THE REPUBLIC) 
OF THE PHILIPPINES 
) , 
Third Regular Session 
} 
""'~ 
SENATE, 
S.B.No. 3540 
9 
NDV 18 i' 1 :JIii 
.. -. 
, 
Introduced by Senator Miriam Defensor Santiago 
1 
AN ACT 
2 
REQUIRING USED CAR DEALERS TO PROVIDE CONSUMERS WITH A WRITTEN 
3 
WARRANTY AGAINST DEFECTS AND REQUIRING PRIVATE SELLERS TO DISCLOSE 
4 
ANY KNOWN USE OR SAFETY DEFECTS. 
Be it enacted by the Senate and the House of Representatives of the Philippines in 
Congress assembled: 
5 
SECTION 1. Short Title. - This Act shall 'be ,known as the "Used Car Lemon Act of 
6 
2009." 
7 
SECTION. 2. Declaration of Policy. - It is hereby declared the policy of the State to 
8 
promote full protection to the rights of consumers in the sale of motor vehicles against sales and 
9 
trade practices which are deceptive, unfair or otherwise inimical to the consumers and the public 
10 
interest. 
11 
The State recognizes that a motor vehicle is a major consumer purchase or investment. 
12 
The consumer rights should thus be clearly defined including the means for redress for violations 
13 
thereof 
14 
SECTION 3. Definitions. -
For purposes oft1l.is Act, the term: 
15 
A. "Secretary" refers to the Secretary of the Department of Trade and Industry; 
16 
B. "DT!" refers to the Department of Trade and Industry; 
17 
C. "Consumer" refers to a buyer, other than for purposes of resale, of a motor vehicle, 
18 
any person to whom such motor vehicle is transferred during the period of any express or 
19 
statutory warranty under this Act applicable to such motor vehicle, and any other person entitled 
20 
by the terms of such warranty to enforce its obligations; 
21 
D. "Dealer" refers to any person engaged in the business of selling, offering for sale, or 
22 
negotiating the retail sale of used motor vehicles or selling motor vehicles as broker or agent for 
1 


1 
another, including the officers, agents and employees of such person and any combination or 
2 
association of dealers, but not including a bank or other financial institution, or the 
3 
commonwealth, its agencies, bureaus, boards, commissions, authorities, nor any of its political 
4 
subdivisions. A person shall be deemed to be engaged in the business of selling used motor 
5 
vehicles if such person has sold more than three used' motor vehicles in the preceding twelve 
6 
months; 
7 
E. "Motor vehicle" refers to any self-propelled four (4)-wheeled road vehicle designed to 
8 
carry passengers including, but not limited to, sedans, coupes, station wagons, convertibles, 
9 
pickUps, vans, sport utility vehicles (SUVs) and Asian utility vehicles (AUVs) but excepting 
10 
motorcycles, delivery trucks, dump trucks, buses, road rollers, trolley cars, street sweepers, 
11 
sprinklers, lawn mowers and heavy equipment, such as, but not limited to, bulldozers, 
12 
payloaders, graders, forklifts, amphibian trucks, cranes and vehicles which run only on rails or 
, 
13 
tracks, and tractors, trailers and traction engines of all kinds used exclusively for agricultural 
14 
purposes. Trailers having any number of wheels, when propelled or intended by attachment to a 
15 
motor vehicle, shall be classified as separate motor vehicle with no power rating; 
16 
F. "Private seller" refers to any person who is not a dealer and who offers to sell or sells a 
17 
used motor vehicle to a consumer; 
18 
G. "Purchase price" refers to the total of all payments made for the purchase of a vehicle, 
19 
including but not limited to any finance charges, registration fees, payments made for credit life, 
20 
accident, health, and damage insurance, and collision and related comprehensive insurance 
21 
coverage and service contracts and the value of a trade-in; 
22 
H. "Repurchase price", the purchase price, as defined above, less any cash award that was 
23 
made by the dealer in an attempt to resolve the dispute and was accepted by the consumer, and 
.. 
24 
less any refunds or rebates to which the consumer is ,entitled, plus any incidental damages not 
25 
previously reimbursed, including but not limited to the reasonable costs of towing from point of 
26 
breakdown to obtain required repairs or to return the vehicle under this section, and the 
27 
reasonable costs of obtaining alternative transportation during the applicable warranty period 
28 
after the second day following each such breakdown not to exceed five hundred pesos (P500.00) 
2 


1 
vehicle rental charges for each day in which the cost of such alternative transportation is 
2 
reimbursable; 
3 
1. "Used motor vehicle" or "used vehicle", any motor vehicle as defined above, 
4 
previously owned by anyone other than the consumer, which has been driven more than the 
• 
5 
limited use necessary in moving or road testing a new vehicle prior to delivery to a consumer. 
6 
SECTION 4. Sales accompanied by written warranty. -
7 
A. No used motor vehicle shall be sold by a dea,ler to a consumer unless accompanied by 
8 
an express written warranty covering the full cost of both parts and labor necessary to repair any 
9 
defect that impairs the said used motor vehicle's safety .or use; 
lOB. Dealer warranties cannot be waived under any circumstances; 
11 
C. Defects that affect only appearance shall not ~e deemed to impair safety or use for the 
12 
purposes of this section. For the purposes of this section, defect shall include defect, malfunction 
13 
or any combination or defects or malfunctions; 
14 
D. Defects or malfunctions which involve parts or components that are covered or are 
15 
warranted under an express warranty issued by the di"aler of the used motor vehicle shall be 
16 
excluded from this section if the following conditions have been met: the manufacturer's 
17 
warranty has been duly assigned or transferred to the buyer; is enforceable according to its terms; 
18 
is not inconsistent with this section; and, the seller has assured that the repair authorized by such 
19 
manufacturer's express warranty was made; . 
20 
E. The terms of the seller's warranty shall be tolled for any period of time the used motor 
21 
vehicle is out of service by reason of repair under the manufacturer's warranty. 
22 
SECTION 5. Duration a/warranty. - The express warranties required by this section 
23 
shall be of the following durations: 
• 
24 
A. For a used motor vehicle which, at the tiine of sale, has been operated less than 
25 
64,500 kilometers, the warranty shall be for ninety days or 6,035 kilometers, whichever occurs 
26 
first; 
27 
B. For a used motor vehicle Which, at the time of sale, has been operated sixty-four 
28 
thousand five hundred kilometers (64,500 km) or more, but less than one hundred twenty-
29 
eight thousand and seven hundred forty-seven kilometers (128,747 km.), the warranty shall 
3 


I 
be for sixty days or, four thousand and twenty-three-'kilometers (4,023 km.), whichever first 
2 
occur; 
3 
C. For a used motor vehicle which, at the time 'of sale, has been operated one hundred 
4 
twenty-eight thousand and seven hundred forty-seven kilometers (128,747 km.), or more, 
5 
but less than two huudred one thousand and one hundred sixty-eight kilometers (201,168 
6 
km.), thirty days or two thousand and twelve kilometers (2,012 km.), whichever first occur; 
7 
D. If the used motor vehicle's true mileage is not known, such warranty period shall be 
8 
determined by the age of said used motor vehicle in th~ following manner: a used motor vehicle 
9 
three years old or less shall have a warranty as provided in paragraph (A); a used motor vehicle 
10 
more than three, but less than six years old, shall have a warranty as provided in paragraph (B); 
11 
and a used motor vehicle six years old or more shall have a warranty as provided in paragraph 
12 
(C). A used motor vehicle's age shall be determined by subtracting its model year from the year 
13 
- in which the warranty holder purchased said used vehicle; 
14 
E. The warranty periods established by this section shall be tolled during any period in 
15 
which the used motor vehicle is out of service as a result of any repair attempt pursuant to any 
16 
warranty created by this section. The applicable warrquty period shall be extended thirty days 
17 
from the date of completion of any repair required by this section as to the defect repaired if the 
18 
warranty would otherwise have expired during such period. 
19 
SECTION 6. Repair of defect. -
20 
A. A dealer may repair, within the meaning _of this section, either by performing the 
21 
repair himself or by arranging and making payment for prompt repair by another; 
22 
B. A consumer shall return a vehicle for repair. under this section by presenting it to the 
23 
dealer no later than five business days after the expiration of the applicable warranty period and 
24 
infolming him of the defect. Said return period shall be tolled during any time period in which 
25 
the consumer has notified the dealer of the defect but c,annot reasonably present the vehicle to the 
26 
dealer; including, but not limited to, the reason \hat a,;used motor vehicle is inoperable and the 
27 
dealer refuses to pay the charge to tow said vehicle. 'Fhe dealer shall immediately accept return 
28 
of a vehicle when it is so presented. Said used motor vehicle shall be deemed out of service 
29 
commencing the day it is so presented, notwithstanding any dealer's failure to accept its return 
4 


'. 
I 
on said day, During the applicable warranty period and the aforesaid return period, the dealer 
2 
shall pay the reasonable costs of towing from point of breakdown up to forty-eight kilometers 
3 
(48 km.) to obtain required repairs or to return the vehicle to the dealer; 
• 
4 
C. Upon return of the used motor vehicle to the consumer after repair, the dealer shall 
5 
provide the consumer with a warranty repair receipt describing (I) the defect complained of, (2) 
6 
the work performed in an attempt to correct such defect and the identity of the repairer if it is not 
7 
the dealer, and (3) the parts replaced in performing such work. For the dealer to toll the ten 
8 
business day period as provided in paragraph CD) of t~\s section said dealer shall attach to each 
9 
such warranty repair receipt copies of such order forms, invoices, receipts or other evidence of a 
10 
parts order and its receipt to evidence his compliance with this paragraph; 
lID. If the dealer fails to repair the same defect within three attempts, or if the used motor 
12 
vehicle is out of service for more than a cumulative total of ten business days after the consumer 
13 
has returned it to the dealer for repair of the same, then the dealer shall accept return of the 
14 
vehicle from the consumer and refund the full repurchase price, less a reasonable allowance for 
15 
use. A reasonable allowance for use shall ten pesos (PIO.OO) per kilometer the motor vehicle has 
16 
been operated between its sale and the dealer's repurchase; 
17 
E. A consumer shall have the option of retaining the use of any vehicle returned under the 
18 
provisions of this section until such time as said 'consumer has been tendered a full refund. The 
19 
use of any vehicle retained by a consumer after its ret~rn to a manufacturer under the provisions 
20 
of this section, shall, in instances in which a refund is tendered, be reflected in the above-
21 
mentioned reasonable allowance for use; 
22 
F. A used motor vehicle shall not be considered out of service for purposes of the ten 
23 
business-day period described hereinabove for any day in which a part necessary to repair a 
24 
defect complained of is not in the dealer's possession; provided, however, that the dealer has 
25 
ordered the part by reasonable means on the same day on which he knew or should have known 
26 
that the part was necessary, except that in no event shall a part's unavailability operate to toll the 
27 
ten business-day period for more than twenty-one daY$. The applicable warranty period shall be 
28 
extended by the number of days a part is unavailable; . 
29 
SECTION 7. Option a/vendor to repurchase v~hicle.-
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1 
At any time within the applicable warranty period and after a consumer has complained 
2 
of a defect, notwithstanding any objection from the consumer, the dealer shall have the option of 
3 
repurchasing a used vehicle and refunding the full repurchase price, less a reasonable allowance 
4 
for use. A reasonable allowance for use shall be fifteen cents for each mile the used motor 
5 
vehicle had been operated between its sale and the dealer's repurchase. 
6 
If the dealer is required to or elects to repurchase a vehicle under the terms of this section, 
7 
the consumer and dealer shall cooperate with each other to execute all necessary documents in 
8 
order to clear the title of any encumbrances on the repurchased vehicle. 
9 
SECTION 8. Private sellers. -
A private seller shall clearly disclose to any prospective 
., 
10 
buyer, before the sale is completed, all defects the seller knows of which impair the used motor 
11 
vehicle's safety or substantially impair its use. Failure to so disclose known defects shall entitle 
12 
the buyer, within thirty days after the sale, to rescind the sale and be entitled to return of all 
13 
monies paid to the seller less a reasonable amount for use as defined in clause (iv) of paragraph 
14 
(A) subsection (3). A reasonable allowance for use shall be ten pesos per kilometer the motor 
15 
vehicle had been operated between its sale and the seller's repurchase. 
16 
In any subsequent action by a buyer under this section, it shall be an affirmative defense 
17 
in any such action that an alleged defect does not impair the vehicle's safety, or substantially 
, 
18 
impair its use, or that it is the result ofthe buyer's negligence, abuse, damage caused by accident, 
19 
vandalism or attempt to modify the vehicle. 
20 
SECTION 9. Implementing Agency and its duties. -
The DTI Secretary shall, within 
21 
sixty (60) days from the effectivity of this Act, promulgate rules and regulations, including those 
22 
of disciplinary nature, to carry out and enforce the provisions of this Act. Flrrther, the DTI shall 
23 
be the lead agency in carrying out the provisions of this Act. 
24 
SECTION 10. Assistance by other agencies. - The DOTC and other agencies, political 
25 
subdivisions and local government units, including government-owned and controlled 
26 
corporations, shall render such assistance as required by the DTI in order to effectively 
27 
implement the provisions of this Act. 
., 
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SECTION. II. Penalties. - The dealer adjudged to have violated the provisions in this 
2 
act shall be liable to pay a minimum amount of One hUI).dred thousand pesos (PhpIOO,OOO.OO) as 
3 
damages to the aggrieved party without prejudice to any civil or criminal liability they andlor the 
4 
responsible officer may incur under existing laws. 
5 
Any private seller adjudged to have violated the provisions in section 7 shall be liable to 
6 
pay a minimum amount of Fifty thousand pesos (Php50,000.00) as damages to the aggrieved 
7 
party without prejudice to any civil or criminal liabilit~ they and/or the responsible officer may 
8 
. incur under existing laws. 
9 
SECTION 12. Appropriation. -
To carry out the provisions of this Act, such amount as 
10 
may be necessary is hereby authorized to be appropriated from the National Treasury. 
II 
Thereafter, the amount necessary for the continuous operation of this program shall be included 
12 
in the annual· appropriation of the DTI. 
13 
SECTION 13. Separability Clause. - If any provision or part hereof, is held invalid or 
14 
unconstitutional, the remainder of the law or the provision not otherwise affected shall remain 
15 
valid and subsisting. 
16 
SECTION 14. Repealing Clause. - Any law, presidential decree or issuance, executive 
17 
order, letter of instruction, administrative order, rule or regulation contrary to or is inconsistent 
18 
with the provision of this Act is hereby repealed, modified, or amended accordingly. 
19 
SECTION 15. Effectivity Clause. - This Act ~hall take effect fifteen (15) days after its 
20 
publication in at least two (2) newspapers of general ci!:pulation. 
Approved, 
lacs 
7