Philippine Lemon Law

REPUBLIC ACT 10642

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Coverage
It only covers motor vehicles. A 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).

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Does the Philippine Lemon Law cover all motor

vehicles?

Not all motor vehicles are covered by

Republic Act No. 10642. It covers only brand new
motor vehicles purchased in the Philippines
reported by a consumer to be in nonconformity with
the vehicles manufacturer or distributors standards
or specifications within the Lemon Law rights
period. It obviously doesnt apply to second-hand
vehicles and to brand-new vehicles purchased abroad.

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What is a brand new motor vehicle?

A motor vehicle is brand new if it satisfies ALL of the
following criteria: (1) it is constructed entirely from
new parts; (2) it is covered, at the time of purchase, by
a manufacturers express warranty 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.

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What is the Lemon Law rights period?

It is the period ending 12 months after the date of the

original delivery of a brand new motor vehicle to a
consumer or the first 20,000 kilometers of operation
after such delivery, whichever comes first. This is
the period during which the consumer can report any
nonconformity and pursue any right as provided under
the Philippine Lemon Law.

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What is nonconformity?
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 manufacturers or distributors standards or
specifications, which cannot be repaired.

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Does the Lemon Law cover every nonconformity?

No. Any defect or condition resulting from the following
causes are excluded:
(a) Noncompliance by the consumer of the obligations

under the warranty;

(b) Modifications not authorized by the manufacturer,
distributor, authorized dealer or retailer;
(c) Abuse or neglect of the brand new motor vehicle; and
(d) Damage to the vehicle due to accident or force
majeure.
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When can a consumer invoke his/her rights under

the Lemon Law?

Consumers cannot immediately invoke his/her

rights. Yes, the consumer can (and must) invoke the
rights at any time within the Lemon Law rights
period, but there must be AT LEAST four (4)
separate repair attempts. Only when the
nonconformity issue remains unresolved after
four SEPARATE repair attempts can the consumer
invoke his/her rights. And the repairs must be made
by the SAME manufacturer, distributor, authorized
dealer or retailer for the SAME complaint.
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After 4 repairs, can the consumer

already complain with the DTI?
Not yet. The consumer must give the manufacturer,
distributor, authorized dealer or retailer a Notice of
Availment of Lemon Law Rights. The written notice
must contain the unresolved complaint and the
consumers intention to invoke his/her rights under
the Lemon Law.

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After the written notice, can the consumer

already complain with the DTI?
The consumer must bring the vehicle to the
manufacturer, distributor, authorized dealer or retailer
from where the vehicle was purchased for a final

attempt to address the complaint of the consumer

to his or her satisfaction. ** Section 7

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During this stage of repair, will the consumer

get any compensation?
The consumer gets a certain amount of compensation
for the non-usage of the vehicle while under repair.
The manufacturer, distributor, authorized dealer or
retailer has the option of providing the consumer with
either:
1. a service vehicle, or
2. a reasonable daily transportation allowance.
Any disagreement on the compensation for non-usage
shall be resolved by the DTI.
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How much is the daily transportation

allowance?

There is no fixed amount. This is 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 airconditioned taxi fare, as evidenced by official receipt,
or in such amount to be agreed upon by the parties.

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Is this non-usage compensation available

during the 4-repair minimum?

Non-usage compensation only applies to the repair

process after the Notice of Availment( a notice given
only after the initial 4-repair process).

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Can the consumer go to courts?

For disputes arising from the provisions of the Lemon
Law, exclusive and original jurisdiction is exercised by
the DTI. Regular courts have no jurisdiction, which
means that Lemon Law disputes, if filed in regular
courts, will be dismissed.

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What are the dispute resolution mechanisms

to be followed by the DTI?
The law provides for three (3) dispute resolution
mechanisms in resolving disputes under the Philippine
Lemon Law
1. Mediation
2. Arbitration and
3. Adjudication.

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Mediation
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.
In the course of its dispute resolution efforts, the
DTI shall endeavor to independently establish the
validity of the consumers outstanding complaint.

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The complaint shall be deemed valid if it is

independently established that the motor vehicle

does not conform to the standards or specifications
set by the manufacturer, distributor, authorized
dealer or retailer.
Upon failure of the negotiation or mediation
between the manufacturer, distributor, authorized,
dealer or retailer and the consumer, the parties
shall execute a certificate attesting to such failure
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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 filing
of the complaint with the DTI.

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Arbitration
a form of alternative dispute resolution, is a

technique for the resolution of disputes outside

the courts. The parties to a dispute refer it
to arbitration by one or more persons, and agree to
be bound by the arbitration decision. A third party
reviews the evidence in the case and imposes a
decision that is legally binding on both sides and
enforceable in the courts.

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Adjudication
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
qualified independent findings as to conformity to
standards and specifications established herein. In
no case shall adjudication proceedings exceed
twenty (20) working days.

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In case a finding 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:

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What are the remedies to consumers?

In case of nonconformity, and there is a finding to such

effect by the DTI, the manufacturer, distributor, authorized

dealer or retailer shall be given the following options:
1. Replacement. The motor vehicle shall be replaced with
a similar or comparable motor vehicle in terms of
specifications and values, subject to
availability. Comparable motor vehicle refers to a motor
vehicle that is identical or reasonably equivalent to the
motor vehicle to be replaced, in terms of specifications and
values, subject to availability, as the motor vehicle existed
at the time of purchase.
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2. Repurchase. The manufacturer, distributor, authorized

dealer or retailer shall accept the return of the motor vehicle

and pay the consumer the purchase price plus the collateral
charges. Collateral charges refer to the fees paid to the Land
Transportation Office (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.
In case the consumer decides to purchase another vehicle with
a higher value and specifications from the same manufacturer,
distributor, authorized dealer or retailer, the consumer shall
pay the difference in cost.
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Disclosure on Resale
Should the returned Lemon Vehicle be made available
for resale, there should be a disclosure in writing to the
next purchaser of the same vehicle the following:
The motor vehicle was returned
The nature of the nonconformity which caused the
return; and
The condition of the motor vehicle at the time of the
transfer to the manufacturer, distributor, authorized
dealer or retailer.
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What if there is no Disclosure on the Resale?

The manufacturer, distributor, authorized dealer or
retailer adjudged to have violated the provisions
requiring disclosure as mentioned in the Lemon Law
shall liable to pay a minimum amount of
Php100,000.00 as damages to the aggrieved party
without prejudice to any civil or criminal liability.

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