Relief from ‘lemon’ cars

Finally, after years of waiting, Congress has given buyers of brand-new motor vehicles an avenue for relief in case they do not get their money’s worth for what is considered, after a house and lot, a Filipino’s most prized possession.

President Aquino recently signed into law Republic Act No. 10642, or the Philippine Lemon Law, which protects the rights of consumers in that major purchase or investment.

The law applies only to brand-new vehicles, or self-propelled, four-wheel road vehicles designed to carry passengers that are “constructed entirely from new parts and covered by a manufacturer’s express warranty at the time of purchase.”

In addition, the vehicle should never have been sold, or registered with the Department of Transportation and Communications or appropriate agency or authority, nor operated on any highway in the Philippines or foreign country.

Motorcycles, delivery trucks, buses, road rollers, trolley cars, heavy equipment, vehicles that run on rails or tracks, and those used exclusively for agricultural purposes are not covered.

A buyer of a brand-new car who thinks his vehicle does not conform with its manufacturer’s or dealer’s standards or specifications has 12 months from its delivery or up to 20,000 kilometers of operation after such delivery, whichever comes first, within which to avail himself of the remedies provided for in the law.

Condition

Nonconformity refers to “any defect or condition that substantially impairs the use, value or safety” of the vehicle in accordance with the manufacturer’s or dealer’s standards or specifications that cannot be repaired.

It does not include defects or conditions caused by the buyer’s failure to comply with his obligations under the warranty, unauthorized modifications, abuse or neglect of the vehicle, and damage due to accident or force majeure.

At any time within the 12-month period or 20,000-km benchmark (or “Lemon Law rights period”), and after four separate attempts to repair the same complaint the defect or condition remains unresolved, the buyer can avail himself of his rights under the law.

For this purpose, he should first notify, in writing, the manufacturer or dealer of the unresolved complaint and his intention to make such an availment.

To expedite compliance with this procedure, the law requires the warranty booklet issued for new cars to “clearly state the manner and form of such notice to constitute a valid and legal notice.”

After serving that notice, the car should be brought to the manufacturer or dealer for a final attempt to satisfactorily address his complaint.

The manufacturer or dealer is obliged to attend to the complaint and take all actions necessary to make the car conform to the warranty standards or specifications.

If the car is not returned for repair on the same complaint within 30 days from its release within the Lemon Law rights period, the repair shall be deemed successful.

Unresolved

In case the defect or condition persists after the 30-day period but still within the Lemon Law rights period, the buyer’s rights remain in force.

When all repair efforts have proven to be fruitless, a complaint may be filed with the Department of Trade and Industry (DTI) for further relief.

Meanwhile, to make up for the buyer’s inability to use his car while under repair, the law requires the manufacturer or dealer to give him reasonable daily transportation allowance equivalent to the fare of an air-conditioned taxi to and from his residence and place of work, or destination, as evidenced by official receipts. Or such amount they may agree upon, or provide a service vehicle for the buyer’s use, at the option of the manufacturer or dealer. Any disagreement that may arise in regard to this temporary relief shall be resolved by the DTI.

To speed up the resolution of disputes over “lemon” cars, DTI, not the regular courts, has been given exclusive and original jurisdiction to resolve them.

In the exercise of this authority, DTI must observe the principles of negotiation, conciliation and mediation so the parties can arrive at an amicable settlement of their dispute.

If these efforts do not succeed, the parties may agree to submit their dispute to arbitration.

Adjudication

In case arbitration is not resorted to, any of the parties may request DTI to conduct adjudication proceedings.

For this purpose, DTI shall rely on independent findings made by other government agencies or qualified independent private agencies in determining whether the subject car conforms to its warranty standards and specifications.

In the event DTI rules in the buyer’s favor, it shall order the manufacturer or dealer to replace the car with a similar or comparable vehicle in terms of specifications and values, subject to availability.

Or accept the return of the car and reimburse the buyer the purchase price plus collateral charges, i.e. registration fees, insurance premium and interest expenses.

If the owner decides to purchase another car with a higher value and specifications from the manufacturer or dealer, he shall pay the difference in cost.

Whether replacement or repurchase, the reasonable allowance for use—20 percent a year deduction from the purchase price, or the product of the distance travelled in kilometers and the purchase price divided by 100,000 kilometers, whichever is lower—shall be deducted in determining the value of the car.

Appeal

What if it turns out that the car was not a “lemon” after all?

In fairness to the manufacturer or dealer, DTI would have to rule in its favor and order the buyer to reimburse the costs it incurred in validating the buyer’s complaint.

Whichever way the decision of DTI’s adjudication officer goes, the losing party may appeal it to the DTI secretary within 15 days from receipt of the decision.

The action of the secretary can, in turn, be appealed to the Court of Appeals for final resolution.

The law is not self-executory. Its mechanics still have to be fleshed out in the implementing rules that DTI is obliged to issue within 90 days from its effectivity. (For comments, please send your e-mail to [email protected].)