Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

EIGHTEENTH CONGRESS
First Regular Session

0443

HOUSE BILL NO.

Introduced by HONORABLE STRIKE B. REVILLA

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 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 purchases of cars that repeatedly fail to meet standards of
quality and performance.

In the Philippines, the purchase of a new car usually 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 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 required, been unprofessionally rebuilt after
collision or tampered with in some manner to conceal high mileage, mechanical defects,
corrosion or other 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 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 vehicle 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 128,746 km. 60 days or 4,023 km., whichever comes first
128,747 to 201, 167 km. 30 days or 2,012 km., whichever comes first
201,168 km. or over No express warranty

Tf the true mileage of the vehicle is unknown at the time of the sale, the warranty
period is calculated according to the age of the vehicle as outlined below:

‘Age of Vehicle Warranty Period

3 years old or less 90 days or 6,035 km., whichever comes first
More than 3 and less than 6 years old 60 days or 4,023 km., whichever comes first
More than 6 years old 30 days 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/her general welfare and establish standards of conduct for business and industry.!

REP. aS REVILLA

2™4 District of Cavite

' This bill was originally filed by former Senator Miriam Defensor Santiago in the 14% and 15% Congresses.



Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

EIGHTEENTH CONGRESS
First Regular Session

rouse pnino:__°443

Introduced by HONORABLE STRIKE B. REVILLA

AN ACT REQUIRING USED CAR DEALERS TO PROVIDE CONSUMERS WITH A
WRITTEN WARRANTY AGAINST DEFECTS AND REQUIRING PRIVATE
SELLERS TO DISCLOSE ANY KNOWN USE OR SAFETY DEFECTS

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 “Used Car Lemon Act”.

Section 2. Declaration of Policy. — It is hereby 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 otherwise inimical to the consumers and the
public interest.

The State recognizes that a motor vehicle is a major consumer purchase or
investment. The consumer rights should thus be clearly defined including the means for
redress for violations thereof.

Section 3. Definition of Terms. — For purposes of this Act, the term:

A. “Secretary” refers to the Secretary of the Department of Trade and Industry;

B. “DTI” refers to the Department of Trade and Industry;

C. “Consumer” refers to a buyer, other than for purposes of resale, of a motor
vehicle, any person to whom such motor vehicle is transferred during the period of
any express or statutory warranty under this Act applicable to such motor vehicle,


and any other person entitled by the terms of such warranty to enforce its
obligations;

. “Dealer” refers to any person engaged in the business of selling, offering for sale,
or negotiating the retail sale of used motor vehicles or selling motor vehicles as
broker or agent for another, including the officers, agents and employees of such
person and any combination or association of dealers, but not including a bank or
other financial institution, or the commonwealth, its agencies, bureaus, boards,
commissions, authorities, nor any of its political subdivisions. A person shall be
deemed to be engaged in the business of selling used motor vehicles if such
person has sold more than three used motor vehicles in the preceding twelve
months;

. “Motor vehicle” refers to any self-propelled four (4)-wheeled road vehicle
designed to carry passengers including, but not limited, sedans, coupes, station
wagons, convertibles, pickups, vans, sport utility vehicles (SUVs) and Asian
utility vehicles (AUVs) but excepting motorcycles, delivery trucks, dump trucks,
buses, 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 inly on rails or tracks,
and tractors, trailers and traction engines of all kinds used exclusively for
agricultural purposes. Trailers 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;

. “Private seller” refers to any person who is not a dealer and who offers to sell or
sells a used motor vehicle to a consumer;

. “Purchase price” refers to the total of all payments made for the purchase of a
vehicle, including but not limited to any finance charges, registration fees,
payments made for credit life, accident, health, and damage insurance, and
collision and related comprehensive insurance coverage and service contracts and
the value of a trade-in;

. “Repurchase price”, the purchase price, as defined above, less any cash award that
was made by the dealer in an attempt to resolve the dispute and was accepted by
the consumer, and less any refunds or rebates to which the consumer is entitled,
plus any incidental damages not previously reimbursed, including but not limited
to the reasonable costs of towing from point of breakdown to obtain required
repairs or to return the vehicle under this section, and the reasonable costs of

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obtaining alternative transportation during the applicable warranty period after the
second day following each breakdown not to exceed five hundred pesos (P500.00)
vehicle rental charges for each day in which the cost of such altemative
transportation is reimbursable;

I. “Used motor vehicle” or “used vehicle”, any motor vehicle as defined above,
previously owned by anyone other than the consumer, which has been driven
more than the limited use necessary in moving or road testing a new vehicle prior

to delivery to a consumer.

Section 4. Sales accompanied by written warranty. —

A. No used motor vehicle shall be sold by a dealer to consumer unless accompanied
by an express written warranty covering the full cost of both parts and labor
necessary to repair any defect that impairs the said used motor vehicle’s safety or
use;

B. Dealer warranties cannot be waived under any circumstances;

C. Defects that affect only appearance shall not be deemed to impair safety or use for
the purposes of this section. For the purposes of this section, defect shall include
defect, malfunction or any combination or defects or malfunctions;

D. Defects or malfunctions which involve parts or components that are covered or are
warranted under an express warranty issued by the dealer of the used motor
vehicle shall be excluded from this section if the following conditions have been
met: the manufacturer’s warranty has been duly assigned or transferred to the
buyer , is enforceable according to its terms; is not inconsistent with this section;
and, the seller has assured that the repair authorized by such manufacturer's
express warranty was made;

E. The terms of the seller’s warranty shall be tolled for any period of time the used
motor vehicle is out of service by reason of repair under the manufacturer's
warranty.

Section 5.Duration of warranty. — The express warranties required by this section

shall be of the following durations:
A. For a used motor vehicle which, at the time of sale, has been operated less than
64,500 kilometers, the warranty shall be for ninety days or 6,035 kilometers,

whichever occurs first;


B. For a used motor vehicle which, at the time of sale, has been operated sixty-four
thousand five hundred kilometers (64,500 km.) or more, but less than one hundred
twenty-eight thousand and seven hundred forty-seven kilometers (128,747 km.),
the warranty shall be for sixty days or, four thousand and twenty-three kilometers
(4,023 km.) whichever first occur;

C. For a used motor vehicle which, at the time of sale, has been operated one
hundred twenty-eight thousand and seven hundred forty-seven kilometers
(128,747 km.), or more, but less than two hundred one thousand and one hundred
sixty-eight kilometers (201,168 km.), thirty days or two thousand and twelve
kilometers (2,012 km.), whichever first occur;

D. If the used motor vehicle’s true mileage is not known, such warranty period shall
be determined by the age of said used motor vehicle in the following manner: a
used motor vehicle three years old or less shall have a warranty as provided in
paragraph (A); a used moto vehicle more than three, but less than six years old,
shall have a warranty as provided in paragraph (B); and u used motor vehicle six
years old or more shall have a warranty as provided in paragraph (C). A used
motor vehicle’s age shall be determined by subtracting its model year from the
year in which the warranty holder purchased said used vehicle;

E. The warranty periods established by this section shall be tolled during any period
in which the used motor vehicle is out of service as a result of any repair attempt
pursuant to any warranty created by this section. The applicable warranty period
shall be extended thirty from the date of completion of any repair required by this
section as to the defect repaired if the warranty would otherwise have expired
during such period.

Section 6. Repair of defect. —

A. A dealer may repair, within the meaning of this section, either by performing the
repair himself or by arranging and making payment for prompt repair by another;

B. A consumer shall return a vehicle for repair under this section by presenting it to
the dealer no later than five business days after the expiration of the applicable
warranty period and informing him of the defect. Said return period shall be tolled
during any time period in which the consumer has notified the dealer of the defect
nut cannot reasonably present the vehicle to the dealer; including, but not limited
to, the reason that a used motor vehicle is inoperable and the dealer refuses to pay
the charge to tow said vehicle. The dealer shall immediately accept return of a

6


vehicle when it id so presented. Said used motor vehicle shall be deemed out of
service commencing the day it is so presented, notwithstanding any dealer's
failure to accept its return on said day. During the applicable warranty period and
the aforesaid return period, the dealer shall pay the reasonable costs of towing
from point of breakdown up to forty-eight kilometers (48 km.) to obtain required
repairs or to return the vehicle to the dealer;

. Upon retum of the used motor vehicle to the consumer after repair, the dealer
shall provide the consumer with a warranty repair receipt describing (1) the defect
‘complained of, (2) the work performed in an attempt to correct such defect and the
identity of the repairer if it is not the dealer, and (3) the parts replaced in
performing such work. For the dealer to toll the ten business day period as
provided in paragraph (D) of this section said dealer shall attach to each such
warranty repair receipt copies of such order forms, invoices, receipts or other
evidence of a parts order and its receipt to evidence his compliance with this
paragraph;

. If the dealer fails to repair the same defect within three attempts, or if the used
motor vehicle is out of service for more than a cumulative total of ten business
days after the consumer has returned it to the dealer for repair of the same, ten the
dealer shall accept return of the vehicle from the consumer and refund the full
repurchase price, less a reasonable allowance for use. A reasonable allowance for
use shall ten pesos (P10.00) per kilometer the motor vehicle has been operated
between its sale and the dealer’s repurchase;

. A consumer shall have the option of retaining the use of any vehicle returned
under the provisions of this section until such time as said consumer has been
tendered a full refund. The use of any vehicle retained by a consumer after its
return to manufacturer under the provisions of this section, shall, in instances in
which a refund is tendered, be reflected in the above-mentioned reasonable
allowance for use;

A. used motor vehicle shall not be considered out of service for purposes of the ten
business-day period described hereinabove for any day in which a part necessary
to repair a defect complained of it is not in the dealer’s possession; provided,
however, that the dealer has ordered the part by reasonable means on the same day
on which he/she knew or should have known that the part was necessary, except
that in no event shall a part’s unavailability operate to toll the ten business-day


period for more than twenty-one days. The applicable warranty period shall be
extended by the number of days a part is unavailable.

Section 7. Option of vendor to repurchase vehicle. —

‘At any time within the applicable warranty period and after a consumer has
complained of a defect, notwithstanding any objection from the consumer, the dealer shall
have the option of repurchasing a used vehicle and refunding the full repurchase price, less
reasonable allowance for use. A reasonable allowance for use shall be fifteen cents for each
mile the used motor vehicle had been operated between its sale and the dealer's repurchase.

If the dealer is required to or elects to purchase a vehicle under the terms of this
section, the consumer and dealer shall cooperate with each other to execute all necessary
documents in order to clear the title of any encumbrances on the repurchased vehicle.

Section 8. Private sellers. — A private seller shall clearly disclose to any prospective
buyer; before the sale is completed, all defects the seller knows of which impair the used
motor vehicle’s safety or substantially impair its use. Failure to disclose known defects shall
entitle the buyer, within thirty days after the sale, to rescind the sale and be entitled to retum
of all monies paid to the seller less a reasonable amount for use as defined in clause (iv) of
paragraph (A) subsection (3). A reasonable allowance for use shall be ten pesos per kilometer
the motor vehicle had been operated between its sale and the seller’s repurchase.

In any subsequent action by a buyer under this section, it shall be an affirmative
defense in any such action that an alleged defect does not impair the vehicle’s safety, or
substantially impair its use, or that it is the result of the buyer’s negligence, abuse, damage
caused by accident, vandalism or attempt to modify the vehicle.

Section 9. Implementing Agency and its duties. - The DTI Secretary shall, within
sixty (60) from the effectivity of this Act, promulgate rules and regulations, including those
of disciplinary nature, to carry out and enforce the provisions of this Act. Further, the DTI
shall be the lead agency in carrying out the provisions of this Act.

Section 10. Assistance by other agencies. - The DOTC and other agencies, political

subdivisions and local government unit, including government-owned and controlled


corporations, shall render such assistance as required by the DTI in order to effectively
implement the provisions of this Act.

Section 11. Penalties. - The dealer adjudged to have the provisions in this Act shall
be liable to pay minimum amount of One hundred thousand pesos (P100,000.00) 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.

Any private seller adjudged to have violated the provisions in Section 7 shall be liable to
pay a minimum amount of Fifty thousand pesos (P50,000.00) 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.

Section 12. Appropriations. — To carry out provisions of this Act, such amount as
may be necessary is hereby authorized to be appropriated from the National Treasury.
Thereafter, the amount necessary for the continuous operation of this program shall be
included in the annual appropriation of the DTI.

Section 13. Separability Clause. — If any portion or part hereof, is held invalid or
unconstitutional, the remainder of the law of the provision not otherwise affected shall remain
valid and subsisting.

Section 14. Repealing Clause. — Any law, presidential decree or issuance, executive
order, letter of instruction, administrative order, rule or regulation contrary to or is
inconsistent with the provision of this Act is hereby repealed, modified, or amended
accordingly.

Section 15. Effectivity Clause. — This Act shall take effect fifteen (15) days after its
publication in at least two (2) newspapers of general circulation.

Approved,