RFBT: Lemon Law
Republic Act No. 10642 (Philippine Lemon Law)
PART I: MULTIPLE CHOICE (30 Items)
Instructions: Choose the letter of the best answer.
1. What is the declared policy of the State regarding motor vehicles?
- A. To promote the sale of motor vehicles to all citizens
- B. To promote full protection to the rights of consumers in the sale of motor vehicles against deceptive, unfair, or inimical trade practices
- C. To regulate the manufacturing of motor vehicles in the Philippines
- D. To impose taxes on all motor vehicle sales
Answer: B
2. The Lemon Law rights period ends at whichever comes first between:
- A. 6 months from original delivery or 10,000 kilometers
- B. 12 months from original delivery or 20,000 kilometers
- C. 18 months from original delivery or 30,000 kilometers
- D. 24 months from original delivery or 40,000 kilometers
Answer: B
3. A “brand new motor vehicle” refers to a vehicle that:
- A. Has been previously registered but never operated
- B. Is constructed entirely from new parts and covered by a manufacturer’s express warranty
- C. Has been operated for testing purposes only
- D. Is imported from another country regardless of prior use
Answer: B
4. Which of the following is EXCLUDED from the definition of “motor vehicle” under the Lemon Law?
- A. Sedans
- B. Sports Utility Vehicles (SUVs)
- C. Motorcycles
- D. Pick-ups
Answer: C
5. “Nonconformity” refers to any defect or condition that:
- A. Slightly affects the appearance of the vehicle
- B. Substantially impairs the use, value or safety of a brand new motor vehicle
- C. Only affects the radio or entertainment system
- D. Is caused by normal wear and tear
Answer: B
6. How many separate repair attempts for the same complaint are required before a consumer may invoke Lemon Law rights?
- A. At least 1 repair attempt
- B. At least 2 repair attempts
- C. At least 3 repair attempts
- D. At least 4 repair attempts
Answer: A
7. The notice of availment under the Lemon Law must be given:
- A. Orally to the sales agent
- B. In writing to the manufacturer, distributor, authorized dealer or retailer
- C. Through social media
- D. By filing a case in court immediately
Answer: B
8. Which agency has exclusive and original jurisdiction over disputes arising from the Lemon Law?
- A. Department of Transportation (DOTr)
- B. Department of Trade and Industry (DTI)
- C. Securities and Exchange Commission (SEC)
- D. Regular Courts
Answer: B
9. If the vehicle is not returned for repair based on the same complaint within how many calendar days from the notice of release, the repair is deemed successful?
- A. 15 calendar days
- B. 20 calendar days
- C. 30 calendar days
- D. 45 calendar days
Answer: C
10. “Collateral charges” include all of the following EXCEPT:
- A. Registration fees paid to LTO
- B. License fees
- C. Cost of insurance
- D. Fuel expenses
Answer: D
11. What is the maximum period for mediation proceedings from the date of filing of the complaint with the DTI?
- A. 5 working days
- B. 10 working days
- C. 15 working days
- D. 20 working days
Answer: B
12. The reasonable allowance for use shall be whichever is LOWER between:
- A. 10% per annum deduction from purchase price, or distance traveled × purchase price ÷ 50,000 kms
- B. 15% per annum deduction from purchase price, or distance traveled × purchase price ÷ 75,000 kms
- C. 20% per annum deduction from purchase price, or distance traveled × purchase price ÷ 100,000 kms
- D. 25% per annum deduction from purchase price, or distance traveled × purchase price ÷ 120,000 kms
Answer: C
13. The implementing agency referred to in the Lemon Law is the:
- A. Department of Transportation and Communications (DOTC)
- B. Department of Trade and Industry (DTI)
- C. Land Transportation Office (LTO)
- D. Department of Finance (DOF)
Answer: B
14. Which of the following is NOT a ground for appeal from the Adjudication Officer’s decision?
- A. Grave abuse of discretion
- B. The decision is in excess of jurisdiction
- C. The decision is not supported by evidence
- D. The decision is unfavorable to the consumer
Answer: D
15. A “comparable motor vehicle” refers to a vehicle that is:
- A. Exactly the same model and year
- B. Identical or reasonably equivalent in terms of specifications and values
- C. Higher in value and specifications
- D. Lower in value but similar in color
Answer: B
16. The warranty rights period under the Lemon Law refers to:
- A. The period when the vehicle is covered by insurance
- B. The period when the manufacturer guarantees the materials used, workmanship and roadworthiness
- C. The period for registration of the vehicle
- D. The period for payment of the purchase price
Answer: B
17. In case of replacement of the motor vehicle, what shall be deducted in determining the value of the nonconforming motor vehicle?
- A. Collateral charges
- B. Reasonable allowance for use
- C. Insurance premiums
- D. Registration fees
Answer: B
18. The consumer shall be provided a reasonable daily transportation allowance equivalent to:
- A. Jeepney fare
- B. Air-conditioned taxi fare, as evidenced by official receipt
- C. Bus fare
- D. Train fare
Answer: B
19. The warranty of a brand new motor vehicle shall be void if:
- A. The vehicle is not regularly maintained
- B. The vehicle is involved in an accident resulting from mechanical failure or willful misconduct
- C. The vehicle is sold to another person
- D. The vehicle exceeds 10,000 kilometers
Answer: B
20. How long does the Secretary of the DTI have to decide on an appeal?
- A. 15 days from receipt thereof
- B. 30 days from receipt thereof
- C. 45 days from receipt thereof
- D. 60 days from receipt thereof
Answer: B
21. “Distributor” refers to any person authorized by the manufacturer to:
- A. Sell brand new motor vehicles directly to the public
- B. Sell brand new motor vehicles to duly authorized dealers or retailers
- C. Manufacture motor vehicle parts
- D. Import motor vehicles for personal use
Answer: B
22. Which of the following is EXCLUDED from the definition of nonconformity?
- A. Defect that substantially impairs the safety of the vehicle
- B. Condition resulting from noncompliance by the consumer of his obligations under the warranty
- C. Defect that substantially impairs the value of the vehicle
- D. Defect that prevents the vehicle from conforming to manufacturer’s standards
Answer: B
23. The consumer may file a complaint before the DTI:
- A. Immediately after the first repair attempt
- B. After giving notice of availment and the nonconformity issue remains unresolved despite the manufacturer’s efforts
- C. Only after 6 months from purchase
- D. Only if the vehicle has been completely damaged
Answer: B
24. In case the consumer decides to purchase another vehicle with a higher value from the same manufacturer, the consumer shall:
- A. Receive the vehicle for free
- B. Pay the difference in cost
- C. Pay only 50% of the difference
- D. Not be allowed to purchase a higher value vehicle
Answer: B
25. The warranty booklet shall clearly state:
- A. Only the price of the vehicle
- B. The manner and form of notice to constitute a valid and legal notice to the manufacturer
- C. Only the maintenance schedule
- D. Only the list of authorized dealers
Answer: B
26. Adjudication proceedings administered by the DTI shall not exceed:
- A. 10 working days
- B. 15 working days
- C. 20 working days
- D. 30 working days
Answer: C
27. Which of the following is considered a “consumer” under the Lemon Law?
- A. Any person who borrows a motor vehicle
- B. Any person who leases a motor vehicle
- C. Any person who purchases a brand new motor vehicle either by cash or credit
- D. Any person who inherits a motor vehicle
Answer: C
28. The Lemon Law rights period begins from:
- A. The date of manufacture of the vehicle
- B. The date of original delivery to the consumer
- C. The date of registration with LTO
- D. The date of payment of the purchase price
Answer: B
29. A party seeking further appeal from the decision of the Secretary of the DTI may file:
- A. A motion for reconsideration
- B. A case for certiorari to the Court of Appeals under Rule 65
- C. An appeal to the Supreme Court directly
- D. A new complaint before the DTI
Answer: B
30. Upon resale of a returned motor vehicle, the manufacturer must disclose in writing to the next purchaser:
- A. Only the purchase price
- B. The nature of the nonconformity which caused the return
- C. Only the name of the previous owner
- D. Only the date of manufacture
Answer: B
PART II: TRUE OR FALSE (15 Items)
Instructions: Write TRUE if the statement is correct, or FALSE if the statement is incorrect.
31. A brand new motor vehicle may have been previously registered with the DOTC and still be considered “brand new” under the Lemon Law.
Answer: FALSE
32. The Lemon Law applies to motorcycles and delivery trucks.
Answer: FALSE
33. The consumer must notify the manufacturer in writing of the unresolved complaint before availing of any remedy under the Lemon Law.
Answer: TRUE
34. The repair attempts under the Lemon Law may include replacement of parts, components, or assemblies.
Answer: TRUE
35. The DTI shall exercise exclusive and original jurisdiction over disputes arising from the Lemon Law.
Answer: TRUE
36. The reasonable allowance for use is calculated at 30% per annum deduction from the purchase price.
Answer: FALSE
37. If a nonconformity is not found, the Adjudication Officer shall direct the consumer to reimburse the manufacturer the costs incurred in validating the consumer’s complaints.
Answer: TRUE
38. The warranty of a brand new motor vehicle remains valid even if the vehicle is involved in an accident resulting from mechanical failure.
Answer: FALSE
39. Mediation proceedings shall be settled not later than twenty (20) working days from the filing of the complaint.
Answer: FALSE
40. A “comparable motor vehicle” must be exactly identical to the vehicle being replaced, with no allowance for differences in specifications.
Answer: FALSE
41. The consumer may invoke Lemon Law rights at any time during the warranty rights period without any prior repair attempt.
Answer: FALSE
42. The implementing agency for the Lemon Law is the Department of Trade and Industry (DTI).
Answer: TRUE
43. The Secretary of the DTI shall decide on the appeal within forty-five (45) days from receipt thereof.
Answer: FALSE
44. Conditions resulting from modifications not authorized by the manufacturer are excluded from the definition of nonconformity.
Answer: TRUE
45. The consumer may file a case for certiorari directly to the Supreme Court from the decision of the Secretary of the DTI.
Answer: FALSE
PART III: MATCHING TYPE (10 Items)
Instructions: Match the terms in Column A with their correct descriptions in Column B. Write the letter of your answer on the space provided. Each item in Column B may be used only once.
Column A
- 46. Manufacturer
- 47. Dealer or retailer
- 48. Nonconformity
- 49. Purchase price
- 50. Collateral charges
- 51. Comparable motor vehicle
- 52. Warranty rights period
- 53. Consumer
- 54. Distributor
- 55. Motor vehicle
Column B
- A. Any self-propelled, four-wheeled road vehicle designed to carry passengers including sedans, coupes, station wagons, convertibles, pick-ups, vans, SUVs and AUVs
- B. The invoice price or the amount of money which the dealer or retailer actually received for the brand new motor vehicle
- C. Any person, natural or juridical, authorized by the manufacturer to sell brand new motor vehicles to duly authorized dealers or retailers
- D. Any defect or condition that substantially impairs the use, value or safety of a brand new motor vehicle which cannot be repaired
- E. The period provided for under the contract of sale when the manufacturer would guarantee the materials used, the workmanship and roadworthiness
- F. Any person, natural or juridical, authorized by the manufacturer or distributor to sell brand new motor vehicles directly to the retail buyers
- G. Fees paid to the LTO for registration and other incidental expenses such as registration fees, license fees
- H. Any person, natural or juridical, who purchases a brand new motor vehicle either by cash or credit from an authorized distributor, dealer or retailer
- I. A motor vehicle that is identical or reasonably equivalent to the motor vehicle to be replaced in terms of specifications and values
- J. Any person, natural or juridical, engaged in the business of manufacturing or assembling motor vehicles
Answers:
- 46. J
- 47. F
- 48. D
- 49. B
- 50. G
- 51. I
- 52. E
- 53. H
- 54. C
- 55. A
PART IV: PROBLEM SOLVING / COMPUTATION (10 Items)
Instructions: Solve the following problems. Show your solutions where applicable.
56. Juan Dela Cruz purchased a brand new SUV for ₱2,500,000. After 8 months, he reported a nonconformity. The vehicle had traveled 15,000 kilometers at the time of the report. Is Juan still within the Lemon Law rights period? Explain.
Answer:
Yes. The Lemon Law rights period ends at whichever comes first between: (1) 12 months from original delivery, or (2) 20,000 kilometers of operation. Juan is within 12 months (8 months) and within 20,000 kilometers (15,000 kms). Therefore, he is still within the Lemon Law rights period.
57. Maria Santos purchased a vehicle for ₱1,800,000. The vehicle was returned due to nonconformity after traveling 8,500 kilometers. Compute the reasonable allowance for use using the formula method.
Answer:
Reasonable allowance for use = (Distance traveled × Purchase price) ÷ 100,000 kms
= (8,500 kms × ₱1,800,000) ÷ 100,000 kms
= ₱15,300,000,000 ÷ 100,000
= ₱153,000
58. Using the same facts in No. 57, compute the reasonable allowance for use using the percentage method (20% per annum). Assume the vehicle was used for 6 months.
Answer:
20% per annum × Purchase price × (Number of months ÷ 12)
= 20% × ₱1,800,000 × (6 ÷ 12)
= ₱360,000 × 0.5
= ₱180,000
59. Based on Nos. 57 and 58, which amount would be used as the reasonable allowance for use? Why?
Answer:
The lower amount shall be used. ₱153,000 (formula method) is lower than ₱180,000 (percentage method). Therefore, the reasonable allowance for use is ₱153,000.
60. Pedro purchased a vehicle for ₱2,200,000. He reported a nonconformity after 14 months and 22,000 kilometers. Is Pedro still within the Lemon Law rights period? Explain.
Answer:
No. The Lemon Law rights period ends at whichever comes first between: (1) 12 months from original delivery, or (2) 20,000 kilometers. Pedro exceeded 12 months (14 months) and exceeded 20,000 kilometers (22,000 kms). Therefore, he is outside the Lemon Law rights period and cannot invoke his rights under the Act.
61. A vehicle was purchased for ₱3,000,000. It traveled 12,500 kilometers before being returned. Using the formula method, what is the reasonable allowance for use?
Answer:
Reasonable allowance for use = (12,500 kms × ₱3,000,000) ÷ 100,000 kms
= ₱37,500,000,000 ÷ 100,000
= ₱375,000
62. The DTI Adjudication Officer ordered the replacement of a nonconforming vehicle. The original purchase price was ₱1,500,000. The reasonable allowance for use was computed at ₱25,000. What is the amount the consumer is entitled to receive if he chooses repurchase instead of replacement?
Answer:
Purchase price + Collateral charges – Reasonable allowance for use
= ₱1,500,000 + Collateral charges – ₱25,000
= ₱1,475,000 + Collateral charges (The exact amount depends on the actual collateral charges paid.)
63. A consumer filed a complaint with the DTI on Monday, June 1. Within how many working days must the mediation proceedings be settled?
Answer:
Mediation proceedings shall be settled not later than ten (10) working days from the date of filing of the complaint. Therefore, the mediation must be completed by June 15 (assuming no holidays in between).
64. A consumer files an appeal with the Secretary of the DTI. The Secretary receives the appeal on March 1. By what date must the Secretary decide on the appeal?
Answer:
The Secretary of the DTI shall decide on the appeal within thirty (30) days from receipt thereof. Therefore, the decision must be rendered by March 31.
65. A vehicle was purchased for ₱2,800,000. It was returned after traveling 9,200 kilometers. Compute the reasonable allowance for use using the formula method.
Answer:
Reasonable allowance for use = (9,200 kms × ₱2,800,000) ÷ 100,000 kms
= ₱25,760,000,000 ÷ 100,000
= ₱257,600
PART V: ENUMERATION (10 Items)
Instructions: List down the required items as asked.
66. Enumerate the FOUR (4) requisites to invoke Lemon Law rights.
Answer:
- 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 specifications
- Within twelve (12) 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 first.
67. Enumerate the FOUR (4) exclusions from the definition of “nonconformity”.
Answer:
- Conditions resulting from noncompliance by the consumer of his or her obligations under the warranty
- Modifications not authorized by the manufacturer or distributor
- Abuse or neglect
- Damage due to accident or force majeure
68. Enumerate the THREE (3) dispute resolution mechanisms under the Lemon Law.
Answer:
- Mediation
- Arbitration
- Adjudication
69. Enumerate the TWO (2) remedies available to the consumer upon a finding of nonconformity by the DTI.
Answer:
- Replace the motor vehicle with a similar or comparable motor vehicle in terms of specifications and values, subject to availability
- Accept the return of the motor vehicle and pay the consumer the purchase price plus the collateral charges
70. Enumerate the THREE (3) options for the reasonable daily transportation allowance provided to the consumer.
Answer:
- Air-conditioned taxi fare, as evidenced by official receipt
- Such amount to be agreed upon by the parties
- A service vehicle at the option of the manufacturer, distributor, authorized dealer or retailer
71. Enumerate the THREE (3) grounds for appeal from the Adjudication Officer’s decision to the Secretary of the DTI.
Answer:
- Grave abuse of discretion
- The decision/order is in excess of jurisdiction or authority of the Adjudication Officer
- The decision/order is not supported by the evidence or there is serious error in the findings of facts
72. Enumerate the vehicles EXCLUDED from the definition of “motor vehicle” under the Lemon Law. (List at least FIVE)
Answer:
- Motorcycles
- Delivery trucks
- Dump trucks
- Buses
- Road rollers
- Trolley cars
- Street sweepers
- Sprinklers
- Lawn mowers
- Heavy equipment (bulldozers, payloaders, graders, forklifts, amphibian trucks, cranes)
- Vehicles which run only on rails or tracks
- Tractors, trailers and traction engines used exclusively for agricultural purposes
73. Enumerate the information that must be disclosed in writing to the next purchaser upon resale of a returned motor vehicle.
Answer:
- The motor vehicle was returned to the manufacturer, distributor, authorized dealer or retailer
- The nature of the nonconformity which caused the return
74. Enumerate the THREE (3) ways a consumer may be provided transportation allowance during the repair period.
Answer:
- Air-conditioned taxi fare, as evidenced by official receipt
- Such amount to be agreed upon by the parties
- A service vehicle at the option of the manufacturer, distributor, authorized dealer or retailer
75. Enumerate all the parties/entities that may be notified by the consumer of the unresolved complaint and intention to invoke Lemon Law rights.
Answer:
- Manufacturer
- Distributor
- Authorized dealer
- Retailer