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1 177:“ 
THIRTEENTH CONGRESS OF THE 
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Third Regulrv Session 
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REPUBLIC OF THE PHILIPPINES 
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i=lg:qf:tIlEp -v:-#.L 
S E N A T E  
S. B. No. 
(In substitution of S. B. Nos. 775,1812,2445 and P. S. Res. No. 104, taking 
into consideration House Bill No. 5303) 
Prepared by the Committee with Senators Villar, Pimentel, Jr., Defensor-Santiago and Roxas as 
authors thereof 
AN ACT 
PROVIDING PROTECTION FOR BUYERS OF MOTOR VEHICLES, 
ENFORCING SALES WARRANTIES, IMPOSING PENALTIES FOR 
VIOLATIONS THEREOF AND FOR OTHER PURPOSES 
Be it enacted by the Senate and the House of Representatives of the Philippines in Congress 
assembled: 
SECTION 1. Short Title. -This Act shall be known as the “Lemon Law of 2006”. 
SEC. 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. 
SEC. 3. Coverage.- The provisions of this Act shall apply to buyers of new motor 
vehicles as well as used motor vehicles to the extent provided for under this Act. 
SEC. 4. Definition ofTerrns.- For purposes of this Act, the following terms shall mean: 
(a) “Consumer” shall mean the purchaser, other than for purposes of resale, of a motor 
vehicle used in substantial part for personal, family, or household purposes, and any 
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person to whom the motor vehicle is transferred for the same purposes during the 
duration of any warranty applicable to such motor vehicle, and any other person entitled 
by the terms of such warranty to enforce the obligations of the warranty. 
(b) ”Manufacturer” shall mean a person, partnership, association, corporation or entity 
engaged in the business of manufacturing or assembling motor vehicles, or of distributing 
motor vehicles to motor vehicle dealem. 
(c) “Manufacturer’s Express Warranty” shall mean the written warranty, so labeled, of the 
manufacturer of a new automobile, including any terms or conditions precedent to the 
enforcement of obligations under that warranty. 
(d) “Motor Vehicle” shall mean only passenger cars, pick-up or panel - trucks, sports utility 
vehicles, Asian utility vehicles, vans, motorcycles, and demonstrators or lease purchase 
vehicles with which warranty was issued. 
(e) “Dealer” or “Seller” shall mean any person other than a manufacturer which sells motor 
vehicles to the public. 
(0 “Lemon Law Rights Period” shall mean the period ending eighteen (18) months afier the 
date of original delivery to the consumer of a new motor vehicle. This shall be the period 
during which the consumer can report any non-conformity to the manufacturer and 
pursue any rights provided in this Act. With respect to second hand motor vehicles, the 
period may be stipulated by the seller and the consumer. 
(8) “Lien” shall mean a security interest in a motor vehicle. 
(h) “Lienholder” shall mean a person, partnership, association, corporation or entity with a 
security interest in a motor vehicle pursuant to a lien. 
(i) “Collateral Charges” shall mean sales-related charges including but not limited to sales 
tax, license fees, finance charges and interest, transportation charges, dealer preparation 
charges or any other charges for service contracts, undergoing rust proofing or installed 
options, not recoverable from a third party. 
(j) “Comparable Motor Vehicle” shall mean a motor vehicle that is identical or reasonably 
equivalent to the motor vehicle to be replaced, as the motor vehicle existed at the time of 
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purchase: Provided, That there shall be an offset from this value for reasonable allowance 
for its use. 
(k) “Non-conformity” shall mean a failure to conform to a warranty, a defect or a condition, 
including those that do not affect the driveability of the vehicle but significantly impairs 
the use, market value, or safety of a motor vehicle. 
(1) “Notify” or “Notification” shall mean that the manufacturer shall be deemed to have been 
notified if a written complaint of the defect or defects has been mailed to it or it has 
responded to the consumer in writing regarding a complaint, or a factory representative 
has either inspected the vehicle or met with the consumer or an authorized dealer 
regarding the non-conformity. 
(m)“Warranty” shall mean any warranty, written or otherwise, of the manufacturer, or any 
affirmations of fact or promise made by the manufacturer in connection with the sale of a 
motor vehicle that become part of the basis of the bargain. The term “warranty” pertains 
to the obligations of the manufacturer in relation to materials, workmanship, and fitness 
of a motor vehicle for ordinary use or reasonable intended purposes throughout the 
duration of the lemon law rights period as defined in this section. 
With respect to a second hand motor vehicle, the warranty shall refer to the 
disclosure of the seller as to the condition of the motor vehicle, and the certain period of 
time within which such condition will subsist. 
(n) “Lemon or Significant Impairment” shall mean that the new motor vehicle is unfit, 
unreliable or unsafe for ordinary use or reasonable intended purposes. 
(0) “Serious safety defect” shall mean a life-threatening malfunction or non-conformity that 
impedes the consumer’s ability to control or operate the new motor vehicle for ordinary 
use or reasonable intended purposes or creates a risk of fire or explosion. 
SEC. 5. Conformify to Wurruntiex- If a motor vehicle does not conform to all 
warranties, and the consumer reports the non-conformity, the manufacturer, its agents, its 
authorized dealer, or the seller in case of second hand motor vehicles, during the warranty 
period, shall make such repairs, free of any charges, as are necessary to make the vehicle 
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conform to such warranties, notwithstanding the fact that such repairs are made after the 
expiration of the manufacturer’s or seller’s warranty period. 
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seller shall: 
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SEC. 6. Non-conformi@ of Motor Vehicles.- If the manufacturer, its agents, authorized 
dealers or the seller in case of second hand vehicles, do not repair or correct the non-conformity, 
after a reasonable number of attempts within the lemon law rights period, the manufacturer or the 
(a) Replace the motor vehicle with a comparable motor vehicle; or 
(b) Accept the return of the motor vehicle and refund to the consumer and any lien holder as 
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their interest may appear the full purchase price, including all collateral charges, 
incidental charges, incidental damages, less a reasonable allowance for the consumer’s 
use of the vehicle up to the date of the first notice of non-conformity that is given to the 
manufacturer, its agents or authorized dealer. The consumer shall have the unconditional 
right to choose a refund rather than a replacement vehicle and to drive the motor vehicle 
until he receives either a replacement or a refund. The subtraction of a reasonable 
allowance for use shall apply to either a replacement or refund of the motor vehicle. 
Mileage, expenses, and reasonable loss of use necessitated by attempts to conform such 
motor vehicle to the express warranty may be recovered by the consumer. 
SEC. I. Presumption of Lemon or Significant Impairment for New Motor Vehicles.- It 
shall be presumed that the new motor vehicle is a lemon or in a significant impairment state if 
during the lemon rights period: 
(a) The same non-conformity has been subject to repair thee or more times by the 
manufacturer, its agents or its authorized dealers and the same non-conformity continues 
to exist; 
(b) The non-conformity is a serious safety defect and has been subject to repair one or more 
times by the manufacturer, its agent or its authorized dealer and the same non-conformity 
continues to exist; or 
(c) The motor vehicle is out of service due to repair for a cumulative total of thirty (30) 
calendar days, unless such repairs could not be performed because of conditions beyond 
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the control of the manufacturer, its agents or authorized dealers, including war, invasion, 
strike, fire, flood or other natural disasters. 
SEC. 8. Lemon Law Rights Period Exlension. - The lemon law rights period shall be 
accordingly extended until such time when the non-conformity has been effectively repaired if 
the manufacturer, the seller or the agent has been notified but no action has been taken. 
SEC. 9. Disclosure. - The manufacturer, or the seller in the case of second hand motor 
vehicles, shall clearly and conspicuously disclose to the consumer, in the warranty or owner’s 
manual, that written notification of the non-conformity to the manufacturer is required before the 
consumer may be eligible for refund or replacement of the vehicle. The manufacturer or the 
seller shall include with the warranty or owner’s manual the name and address to which the 
consumer shall send such written notification. 
SEC. 10. Nofifcation Requiremenf.- Prior to availing himself of the provisions of this 
section, it shall be the responsibility of the consumer, or his representative, to notify the 
manufacturer of the need for the correction or repair of the non-conformity, unless the 
manufacturer has already been notified. If the manufacturer or factory representative has not 
been notified of the conditions set forth in Section 7, and any of the conditions set forth in 
Section 7 already exists, the manufacturer shall be given additional opportunity, not to exceed 
fifteen (15) days, to correct or repair the non-conformity. If notification shall be mailed to an 
authorized dealer, the authorized dealer shall upon receipt, forward such notification to the 
manufacturer. 
SEC. 11. Remedies. - Any consumer who suffers loss by reason of a violation of any 
provision of this Act may bring an action to enforce such provision. Any consumer who is 
successful in such an action or any defendant in any frivolous action brought by a consumer shall 
recover reasonable attorney’s fees and other costs incurred in bringing such actions. 
Nothing herein shall be construed to limit or impair the rights and remedies of a 
consumer under any other law. 
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SEC. 12. Definses. - The manufacturer or any other person against whom an action is 
brought may deny liability by raising the following affirmative defenses: 
(a) An alleged non-conformity does not make the vehicle a lemon or is a significant 
impairment or is a serious safety defect as defined under this Act; and 
(b) A non-conformity is the result of abuse, neglect, or unauthorized modification or 
alteration of a motor vehicle by a consumer. 
SEC. 13. Mediation Proceedings.- Prior to litigation, the parties shall be required to 
undergo mediation proceedings under the Bureau of Trade Regulation and Consumer Protection 
and the Consumer Welfare and Trade Regulation Group or such other agencies as may be 
designated by the Secretary of the Department of Trade and Industry which has the necessary 
capability and expertise pertaining to motor vehicles. 
Within six (6) months after the effectivity of this Act, the said agencies are hereby 
mandated to draft and promulgate its rules and procedures for said mediation proceedings. The 
rules shall incorporate an evaluation by the agency’s experts of any technical issues, which shall 
be considered with finality. 
SEC. 14. Award of Damages.- In any action brought by the consumer due to the 
manufacturer’s failure to comply with the decision, within the scope of the procedure’s authority, 
rendered as a result of a dispute resolution proceeding or a court order, the court may grant moral 
and exemplary damages, plus other equitable relief as the c o w  deems appropriate, including 
attorney’s fees. 
SEC. 15. Prescriprive Period- Any action brought under this Act shall be commenced 
within the lemon law rights period following the date of original delivery of the motor vehicle to 
the consumer; however, any consumer whose good faith attempts to settle the dispute have not 
resulted in the satisfactory correction or repair of the non-conformity, replacement of the motor 
vehicle or refund to the consumer of the amount described in subsection (b) of Section 6 of this 
Act, shall have twelve (12) months from the date of the final action taken by the manufacturer in 
its dispute settlement procedure, or within the lemon law rights period, whichever is longer, to 
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file an action in the proper court, provided the consumer has rejected the manufacturer’s final 
action. 
SEC. 16. Disclosure of Transfer of Vehicles. - If a motor vehicle that is returned to the 
manufacturer or distributor either under this Act or by judgment, decree or award is then 
transferred to a dealer, the manufacturer or distributor shall disclose this information to the 
dealer prior to any sale, lease, or transfer. The manufacturer or distributor shall disclose the 
same to the Land Transportation Office (LTO) which shall then inscribe the ownership 
certificate with notation “Lemon Buyback” and afix a decal to the vehicle if the manufacturer 
knew or should have known that the vehicle is required by law to be replaced or accepted for 
restitution due to failure to comply with warranties. 
SEC. 17. Disclosure on Re-sale. - If the returned vehicle is then made available for 
resale, the manufacturer shall, prior to sale, lease, or transfer, disclose in writing in a clear and 
conspicuous manner to the dealer that: 
(a) the motor vehicle was returned to the manufacturer, distributor, factory or branch; 
(b) the nature of the non-conformity which resulted in the return; 
(c) the repairs, if any, made to the vehicle in an attempt to correct each non-conformity; 
(d) the title to the vehicle has been inscribed with “Lemon Law Buyback” notation; and 
(e) the condition of the motor vehicle at the time of the transfer to the dealer. 
It shall be the responsibility of the dealer that receives the disclosure to give notice of its 
contents to any prospective purchaser prior to sale, and to transfer the disclosure, or a copy 
thereof to the next purchaser. A dealer’s responsibility under this section shall cease upon the 
sale of the affected motor vehicle to the first purchaser not for resale. 
SEC. 18. Prohibitions.- Any automobile manufacturer, seller, importer, distributor, 
dealer, or lien-holder who reacquires, or assists in reacquiring a motor vehicle, whether by 
judgment, decree, arbitration award, settlement agreement, or voluntary agreement, is prohibited 
fiom doing either of the following: 


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1) Requiring, as a condition of the reacquisition of the motor vehicle, that a buyer or 
lessee who is a resident of the Philippines agrees not to disclose the problems with the 
vehicle experienced by the buyer or lessee or the non-financial terms of the 
reacquisition; and 
2) Including, in any release or other agreement, whether prepared by the manufacturer, 
seller, importer, distributor, dealer, or lien-holder, for signature by the buyer or lessee, 
a confidentiality clause, gag clause, or similar clause prohibiting the buyer or lessee 
from disclosing information to anyone about the problems with the vehicle, or the 
non-financial terms of the reacquisition of the vehicle by the manufacturer, importer, 
distributor, dealer, or lien-holder. 
a) Any confidentiality clause, gag clause, or similar clause in such a release or other 
agreement in violation of this section shall be null and void as against the public 
policy of this state. 
b) Nothing in this section is intended to prevent any confidentiality clause, gag 
clause, or similar clause regarding the financial terms of the reacquisition of the 
vehicle. 
SEC. 19. Penalties. - Any person found guilty of violating any of the provisions of the 
foregoing prohibited acts shall be penalized with imprisonment of not less than two (2) years to 
not more than six (6) years or a fine of not less than One hundred thousand pesos (P100,000.00), 
or both, at the discretion of the Court. 
(a) The foregoing penalty shall be without prejudice to any civil or criminal liability they 
and/or their responsible officers may incur under existing laws; 
(b) If the offender is an alien, he shall be deported after service of sentence and payment of 
fine without further deportation proceedings; 
(c) In case the offender is a naturalized citizen, he shall, in addition to the penalty prescribed 
herein, suffer the penalty of cancellation of his naturalization certificate and its 
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registration in the civil registrar and immediate deportation after service of sentence and 
payment of fine; 
(d) Any director, officer, agent of a corporation who shall authorize, order or perform any of 
the acts or practices constituting in whole or in part a violation of the preceding section, 
and who has knowledge or notice of non-compliance received by the corporation from 
the concerned department, shall be subject to penalties to which that corporation may be 
subject; and 
(e) In case the violation is committed by, or in the interest of a foreign juridical person duly 
licensed to engage in business in the Philippines, such license to engage in business in the 
Philippines shall immediately be revoked. 
SEC. 20. Repealiitg Clause. - All laws, decrees, executive orders, issuances, rules or 
regulations or parts thereof, which are inconsistent with the provisions of this Act, are hereby 
deemed repealed, amended or modified accordingly. 
SEC. 21. Sepavabilify 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. 
SEC. 22. E’ctivify. - This Act shall take effect fifteen (1 5) days after its publication in 
the 
Official 
Gazette 
or 
in 
two 
national 
newspapers 
of 
general 
circulation. 
Approved, 
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