July 15, 2014

REPUBLIC ACT NO. 10642

AN ACT STRENGTHENING CONSUMER PROTECTION IN THE PURCHASE OF BRAND

NEW MOTOR VEHICLES

SECTION 1. Short Title. — This Act shall be known as the "Philippine Lemon Law".
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 business and trade practices which are deceptive, unfair or otherwise inimical
to consumers and the public interest.
The State recognizes that a motor vehicle is a major consumer purchase or
investment. Hence, the rights of consumers should be clearly de ned, including the
means for redress for violations thereof.
SECTION 3. Definition of Terms. — As used in this Act:
(a) Brand new motor vehicle refers to a vehicle constructed entirely from
new parts and covered by a manufacturer's express warranty at the
time of purchase that it has never been sold or registered with the
Department of Transportation and Communications (DOTC) or an
appropriate agency or authority, and has never been operated on any
highway of the Philippines, or in any foreign state or country;
(b) Collateral charges refer to the fees paid to the Land Transportation
Of ce (LTO) for the registration of a brand new motor vehicle and
other incidental expenses such as, but not limited to, the cost of
insurance pertaining to the vehicle, chattel mortgage fees and interest
expenses if applicable;
(c) Comparable motor vehicle refers to a motor vehicle that is identical or
reasonably equivalent to the motor vehicle to be replaced, in terms of
speci cations and values, subject to availability, as the motor vehicle
existed at the time of purchase: Provided, That there shall be an
offsetting from this value for reasonable allowance for its use;
(d) Consumer refers to any person, natural or juridical, who purchases a
brand new motor vehicle either by cash or credit from an authorized
distributor, dealer or retailer in the Philippines;
(e) Dealer or retailer refers to any person, natural or juridical, authorized by
the manufacturer or distributor to sell brand new motor vehicles
directly to the retail buyers and the public;
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(f) Distributor refers to any person, natural or juridical, authorized by the

manufacturer to sell brand new motor vehicles to duly authorized
dealers or retailers;
(g) Implementing agency refers to the Department of Trade and Industry
(DTI), reorganized under Title X, Book IV of Executive Order No. 292,
series of 1987, otherwise known as the "Administrative Code of
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 1987";
(h) Lemon Law rights period refers to the period ending twelve (12) months
after the date of the original delivery of a brand new motor vehicle to a
consumer or the rst twenty thousand (20,000) kilometers of
operation after such delivery, whichever comes rst. This shall be the
period during which the consumer can report any nonconformity, as
de ned in paragraph (k) herein, to the standards and speci cations of
the manufacturer, authorized distributor, authorized dealer or retailer,
and pursue any right as provided for under this Act;
(i) Manufacturer refers to any person, natural or juridical, engaged in the
business of manufacturing or assembling motor vehicles;
(j) Motor vehicle refers to any self-propelled, four (4)-wheeled road vehicle
designed to carry passengers including, but not limited to, sedans,
coupes, station wagons, convertibles, pick-ups, vans, sports utility
vehicles (SUVs) and Asian Utility Vehicles (AUVs) but excluding
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 only 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;
(k) Nonconformity 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 speci cations, which cannot be repaired, but excluding
conditions resulting from noncompliance by the consumer of his or
her obligations under the warranty, modi cations not authorized by
the manufacturer or distributor, abuse or neglect, and damage due to
accident or force majeure;
(l) Purchase price refers to the invoice 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;
(m) Warrant y 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 obligations under the
warranty; and
(n) Warranty rights period refers to the period provided for under the
contract of sale when the manufacturer would guarantee the
materials used, the workmanship and the roadworthiness of a brand
new motor vehicle for ordinary use or reasonable intended purposes.
SECTION 4. Coverage. — This Act shall cover brand new motor vehicles
purchased in the Philippines reported by a consumer to be in nonconformity with the
vehicle's manufacturer or distributor's standards or speci cations within twelve (12)
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 months from the date of original delivery to the consumer, or up to twenty thousand
(20,000) kilometers of operation after such delivery, whichever comes rst. The
following causes of nonconformity shall be excluded:
(a) Noncompliance by the consumer of the obligations under the warranty;
(b) Modi cations not authorized by the manufacturer, distributor, authorized
dealer or retailer;
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(c) Abuse or neglect of the brand new motor vehicle; and

(d) Damage to the vehicle due to accident or force majeure.
SECTION 5. Repair Attempts. — At any time within the Lemon Law rights period,
and after at least four (4) separate repair attempts by the same manufacturer,
distributor, authorized dealer or retailer for the same complaint, and the nonconformity
issue remains unresolved, the consumer may invoke his or her rights under this Act.
The repair may include replacement of parts, components, or assemblies.
SECTION 6. Notice of Availment of 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 or her rights under this Act within the Lemon Law rights period.
The warranty booklet issued by the manufacturer, distributor, authorized dealer
or retailer shall clearly state the manner and form of such notice to constitute a valid
and legal notice to the manufacturer, distributor, authorized dealer or retailer. It shall
also clearly state the responsibility of the consumer under this section.
SECTION 7. Availment of Lemon Law Rights. — Subsequent to ling the notice of
availment referred to in the preceding section, the consumer shall bring the vehicle to
the manufacturer, distributor, authorized dealer or retailer from where the vehicle was
purchased for a nal attempt to address the complaint of the consumer to his or her
satisfaction.
It shall be the duty of the manufacturer, distributor, authorized dealer or retailer,
upon receipt of the motor vehicle and the notice of nonconformity required under
Section 6 hereof, to attend to 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 speci cations of the manufacturer, distributor, authorized
dealer or retailer for such vehicle.
In case the nonconformity issue remains unresolved despite the manufacturer,
distributor, authorized dealer or retailer's efforts to repair the vehicle, pursuant to the
consumer's availment of his or her Lemon Law rights, the consumer may le 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 days from the date of notice of release of the motor vehicle to the consumer
following this repair attempt within the Lemon Law rights period, the repair is deemed
successful: Provided, nally , That, in the event that the nonconformity issue still exists
or persists after the thirty (30)-day period but still within the Lemon Law rights 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
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 period of availment of the Lemon Law rights, the consumer shall be 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 or destination
and vice versa, equivalent to air-conditioned taxi fare, as evidenced by of cial receipt, or
in such amount to be agreed upon by the parties, or a service vehicle at the option of
the manufacturer, distributor, authorized dealer or retailer. Any disagreement on this
matter shall be resolved by the DTI.
Nothing herein shall be construed to limit or impair the rights and remedies of a
consumer under any other law.
SECTION 8. Remedies for Dispute Resolution. — The DTI shall exercise exclusive
and 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, conciliation and mediation towards
amicable settlement between the manufacturer, distributor,
authorized dealer or retailer and the consumer shall be strictly
observed; LLphil

(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 DTI shall likewise retain
the services of other government agencies or quali ed
independent private entities in the ascertainment of the validity
of the consumer's complaint. Any cost incurred in establishing
the validity of the consumer's complaint shall be borne jointly
by the consumer and the manufacturer, distributor, authorized
dealer or retailer;
(3) The complaint shall be deemed valid if it is independently
established that the motor vehicle does not conform to the
standards or speci cations set by the manufacturer,
distributor, authorized dealer or retailer;
(4) Upon failure of the negotiation or mediation between the
manufacturer, distributor, authorized, dealer or retailer and the
consumer, the parties shall execute a certi cate attesting to
such failure; and
(5) At any time during the dispute resolution period, the manufacturer,
distributor, authorized dealer or retailer and the consumer shall
be encouraged to settle amicably. All disputes that have been
submitted for mediation shall be settled not later than ten (10)
working days from the date of ling of the complaint with the
DTI.
(b) Arbitration
In the event there is a failure to settle the complaint during the mediation
proceedings, both parties may voluntarily decide to undertake
arbitration proceedings.
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 (c) Adjudication
(1) In the event that both parties do not undertake arbitration
proceedings, at least one of the parties may commence
adjudication proceedings, administered by the DTI. The DTI
shall rely on the quali ed independent ndings as to conformity
to standards and speci cations established herein. In no case
shall adjudication proceedings exceed twenty (20) working
days;
(2) In case a nding of nonconformity is arrived at, the DTI shall rule in
favor of the consumer and direct the manufacturer, distributor,
authorized dealer or retailer 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 speci cations and values,
subject to availability; or
(ii) Accept the return of the motor vehicle and pay the
consumer the purchase price plus the collateral charges.
In case the consumer decides to purchase another vehicle with a
higher value and speci cations from the same manufacturer,
distributor, authorized dealer or retailer, the consumer shall pay
the difference in cost.
In both cases of replacement and repurchase, the reasonable
allowance for use, as de ned in this Act, shall be deducted in
determining the value of the nonconforming motor vehicle; and
(3) In case a nonconformity of the motor vehicle is not found by the
DTI, it shall rule in favor of the manufacturer, distributor,
authorized dealer or retailer, and direct the consumer to
reimburse the manufacturer, distributor, authorized dealer or
retailer the costs incurred by the latter in validating the
consumer's complaints. EaHIDC

An appeal may be taken from a nal judgment or order of the

Adjudication Of cer which completely disposes of the case
within fteen (15) days from receipt thereof. The appeal shall
be taken by ling a Memorandum of Appeal with the Secretary
of the DTI, with Notice of Appeal to the Adjudication Of cer,
and with a copy duly furnished the adverse party or parties on
any of the following grounds:
(i) Grave abuse of discretion;
(ii) The decision/order is in excess of jurisdiction or authority of
the Adjudication Officer; and
(iii) The decision/order is not supported by the evidence or
there is serious error in the findings of facts.
The Secretary of the DTI shall decide on the appeal within thirty (30)
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 days from receipt thereof. A party seeking further appeal from
the decision of the Secretary of the DTI may le a case for
certiorari to the Court of Appeals under Section 4, Rule 65 of
the Revised Rules of Court.
SECTION 9. Determination of Reasonable Allowance for Use. — For purposes of
this Act, "reasonable allowance for use" shall mean twenty percent (20%) per annum
deduction from the purchase price, or the product of the distance traveled in kilometers
and the purchase price divided by one hundred thousand (100,000) kilometers,
whichever is lower.
SECTION 10. Disclosure on Resale. — Should the returned motor vehicle be made
available for resale, the manufacturer, distributor, authorized dealer or retailer shall,
prior to sale or transfer, disclose in writing to the next purchaser of the same vehicle
the following information:
(a) The motor vehicle was returned to the manufacturer, distributor,
authorized dealer or retailer;
(b) The nature of the nonconformity which caused the return; and
(c) The condition of the motor vehicle at the time of the transfer to the
manufacturer, distributor, authorized dealer or retailer.
The responsibility of the manufacturer, distributor, authorized dealer or retailer
under this section shall cease upon the sale of the affected motor vehicle to the rst
purchaser.
SECTION 11. Penalty. — The manufacturer, distributor, authorized dealer or
retailer adjudged to have violated the provisions requiring disclosure as mentioned in
the preceding section shall be liable to pay a 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 of cer may incur under existing
laws.
SECTION 12. Assistance by Other Agencies. — The DOTC and other agencies,
political subdivisions, local government units, including government-owned and/or -
controlled corporations, shall render such assistance as required by the DTI in order to
effectively implement the provisions of this Act.
SECTION 13. Implementing Rules and Regulations. — The DTI shall promulgate
the necessary implementing rules and regulations within ninety (90) days from the
effectivity of this Act.
SECTION 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.
SECTION 15. Repealing Clause. — All laws, decrees, executive orders, issuances,
rules and regulations or parts thereof which are inconsistent with the provisions of this
Act are hereby deemed repealed, amended or modified accordingly.
SECTION 16. Effectivity. — This Act shall take effect fteen (15) days after its
publication in the Official Gazette or in any newspaper of general circulation. cCHETI

Approved: July 15, 2014.

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