Special Laws on Sales

Lecture for the Senior Class of 2022

Accountancy Department of the Ateneo de Zamboanga University
Outline of the lecture
• Breach of contract of sale
• Article 1484 of the Civil Code (i.e. Recto Law)
• Republic Act No. 6552 (i.e. the Realty Installment Buyer Protection Act, or the
Maceda Law)
• Presidential Decree No. 957 (i.e. The Condominium Act)
• Batas Pambansa Bilang 22 (Bouncing Checks Law) in relation to Article
315 of the Revised Penal Code (Swindling or Estafa)
• Republic Act No. 7394 (i.e. The Consumer Act of the Philippines)
• Republic Act No. 7581 (i.e. The Price Act)
• Republic Act No. 10642 (i.e. The Philippine Lemon Law)
K.J. Culajara, CPA, JD 2
Breach of Contract of Sale
Breach of contract
• Remedies of the seller in case of sale of goods
• Specific performance with damages, OR
• Rescission with damages
• When ownership is transferred to the buyer – the seller may maintain an action
against him for the price of the goods, i.e., specific performance (Art. 1595)
• When there is no transfer of ownership to the buyer
• If the goods can be resold for a reasonable price – the seller may resell.
• If the goods cannot be resold – the seller can deliver the goods and if the buyer refuses, then
the seller may notify the buyer that the same is being held by the seller as bailee for the
buyer then maintain an action for the price, i.e., specific performance (Art. 1595)
• When the price is payable on a certain day and the buyer fails to pay on the day set
– the seller can maintain action for the price, i.e., specific performance (Art. 1595).

K.J. Culajara, CPA, JD 4

Unpaid seller
• An unpaid seller is the seller of goods deemed to be unpaid either:
• When the whole of the price has not been paid or tendered, or
• When the seller received bill of exchange or negotiable instrument as a condition for payment and the condition
has been broken by reason of the dishonor of the instrument, the insolvency of the buyer, or otherwise (Ar. 1592)
• Requisites of unpaid seller
• Physical possession is with the seller
• The seller is unpaid
• The subject of the matter are goods (not real properties).
• Special remedies of unpaid seller
• Possessory lien
• Stoppage in transit
• Special right of re-sale
• Special right to rescind
• Note: only when the unpaid seller has exercised possessory lien or stoppage in transit can the seller proceed with his other special
rights of resale or to rescind.

K.J. Culajara, CPA, JD 5

Possessory lien
• The seller is not bound to deliver if the buyer has not paid him the price. (Art. 1524)
Possessory lien cannot be availed when seller does not have custody over the goods.
• When part of the goods has been delivered, the possessory lien may still be exercised on goods
undelivered.
• The possessory lien is exercisable only in the following circumstances:
• Goods sold without stipulation as to credit
• Goods sold on credit but term of credit has expired
• Buyer has become insolvent.
• Instances when possessory lien is lost
• The seller delivers goods to the carrier for transmission to the buyer without reserving ownership in
goods or right to possess them
• Buyer or his agent lawfully obtains possession of goods
• Waiver
• When the seller parts with his goods (but the seller may still exercise stoppage in transitu)

K.J. Culajara, CPA, JD 6

Stoppage in transitu
• Applicable only when the goods are in transit, and that the buyer becomes
insolvent.
• When are goods considered to be in transit
• The goods reached the point of destination
• Before reaching destination, the buyer or his agent obtains delivery of the goods
• Goods are supposed to have been delivered to buyer but the carrier refused
• Bailee or carrier acknowledges that he is holding the goods for the carrier or his agent
(Art. 1531).
• How right is exercised
• Obtain actual possession of the goods
• Give actual notice of claim to the carrier or bailee in possession thereof.
• Note: Notice by the seller to the buyer is not required. Only notice to the carrier is essential.

K.J. Culajara, CPA, JD 7

Other special rights
• Special right to resell the goods
• The special right to resell the goods can be exercised when:
• The goods are perishable
• The contract stipulates the right of resale in case the buyer defaults in payment
• The buyer defaults on his payment of price of an unreasonable time.
• Special right to rescind
• The special right to rescind can be exercised under the following instances:
when it is expressly stipulated, or when the buyer is in default for
unreasonable time.

K.J. Culajara, CPA, JD 8

Recto Law for Sale of Movables on
Installments
• The Recto Law covers installment sales and financing transactions on movable property and
contracts of lease of movable property with option to purchase.
• A contract to sell is not covered.
• In a contract to sell, failure to fully pay the purchase price results in the cancellation of the contract, and the
parties shall stand as if the obligation to sell never existed.
• Forfeiture of partial payments may only be valid if there is a stipulation to that effect, subject to payments of reasonable rents.
• Remedies available under the Recto Law
• Exact fulfillment of the obligation, should the buyer fail to pay any installment
• Rescind the sale, should the buyer’s failure to pay cover two or more installments
• Foreclose the chattel mortgage, if one is constituted, should the buyer’s failure to pay cover two or more
installments. Note: Once foreclosure is resorted to, the seller can no longer claim for remaining balance on the
purchase price.
• The remedies are alternative, and not cumulative. Except when the seller chooses exact
fulfillment, but it becomes impossible, rescission may be pursued subsequently.

K.J. Culajara, CPA, JD 9

Remedies of seller in case of sale of
immovables
• General remedies of seller in case of sale of immovables
• Specific performance with damages, or
• Rescission with damages

K.J. Culajara, CPA, JD 10

Maceda Law (R.A. No. 6552)
• The Maceda Law applies to all sale of residential real estate on installments
including contracts to sell and those financed through banking institutions.
• Exclusions from the coverage of Maceda Law
• Industrial real estate
• Commercial real estate
• Sale to tenants under agrarian laws
• Requisites to avail remedies under Maceda Law
• The failure to pay installments was due to reasons, other than failure of the
developer to develop the subdivision or condominium according to the approved
plan and to comply with such within the time limit.
• Only covers residential lots including condominium units, excluding sales to tenants.

K.J. Culajara, CPA, JD 11

Maceda Law (R.A. No. 6552)
• Buyer pays less than 2 installments
• Buyer is entitled to a grace period of 60 days
• If buyer does not pay within 60 days, the seller may cancel the sale after 30 days from
buyer’s receipt of notice of cancellation.
• Here, the buyer is not entitled to any refund.
• Buyer pays at least 2 installments
• Buyer is entitled to a grace period equivalent to 1 month for every year of installment paid
(Note: The buyer may exercise this once in every 5 years)
• If buyer defaults within the grace period, the seller shall
• Pay the buyer the cash surrender value of 50% of the total payments made by the buyer
• Pay additional 5% after 5 years for every year, provided that the payments do not exceed 90%
• Issue notice of cancellation
• Rescission takes place after 30 days from receipt of notice and the payment of the cash surrender value

K.J. Culajara, CPA, JD 12

Subdivision/Condominium Buyer’s
Protective Decree (P.D. 957)
• No installment payment made by a buyer in a subdivision or
condominium project for the lot or unit he contracted to buy shall be
forfeited in favor of the owner or developer when the buyer, after due
notice to the owner or developer, desists from further payment due
to the failure of the owner or developer to develop the subdivision or
condominium project according to the approved plans and within the
time limit for complying with the same.
• Such buyer may, at his option, be reimbursed the total amount paid
including amortization interests but excluding delinquency interests,
with interest thereon at the legal rate. (P.D. 957, Section 23)

K.J. Culajara, CPA, JD 13

Subdivision/Condominium Buyer’s
Protective Decree (P.D. 957)
• The rights of the buyer in the event of his failure to pay the
installments due for reasons other than the failure of the owner or
developer to develop the project shall be governed by R.A. 6552 (the
Maceda Law).
• If the contract was entered prior to enactment of the said law,
defaulting buyer shall be entitled to the corresponding refund based
on the installments paid after the effectivity of the law in the absence
of any provision in the contract to the contrary. (P.D. 957, Section 24).

K.J. Culajara, CPA, JD 14

 Summary of remedies of seller
If the real property is a
condominium unit or
Installment Maceda Law
Sale of subdivision lot, apply
Immovable Subdivision/Condominium
Property Buyer’s Protective Decree
(P.D. 957) in relation to
Specific Performance with
Non- Maceda Law
damages, or Rescission
installment with damages (Civil Code)
Sale
Transaction
Sale of goods and remedies
of the unpaid seller (i.e.
Sale of Installment Recto Law
possessory lien, stoppage
Movable in transitu, special right to
Property re-sale, special right to
rescind).
Specific Performance with
Non-
damages, or Rescission
installment with damages (Civil Code)

K.J. Culajara, CPA, JD 15

Remedies of the buyer
• The buyer may suspend payment in case
• He is disturbed in the possession or ownership of the thing acquired;
• He has reasonable grounds to fear such disturbance
• Note: There is no right to suspension of payment if the seller gives security for the return of
the price.
• Remedies in case of double sale
• Movable properties – the first buyer to possess in good faith shall prevail.
• Immovable properties
• The first to register in good faith shall prevail
• In case no registration is made, then the first to possess in good faith shall prevail
• If there is no registration and no possession in good faith, then the person who presents
oldest title in good faith shall prevail.

K.J. Culajara, CPA, JD 16

 Batas Pambansa 22
(Bouncing Checks Law) and
Estafa
Ways of violating B.P. 22
• By making or drawing and issuing any check to apply on account or for value,
knowing at the time of issue that he does not have sufficient funds in or credit
with the drawee bank for the payment of such check in full upon its
presentment, which check is subsequently dishonored by the drawee bank for
insufficiency of funds or credit or would have been dishonored for the same
reason had not the drawer, without any valid reason, ordered the bank to
stop payment.
• Having sufficient funds in or credit with the drawee bank when he makes or
draws and issues a check, by failing to keep sufficient funds or to maintain
credit to cover the full amount of the check is presented within a period of 90
days from the date appearing thereon, for which reason it is dishonored by
the drawee bank.
K.J. Culajara, CPA, JD 18
Other matters
• The gravamen of B.P. 22 is the issuance of a check, and not the non-
payment of an obligation. Deceit is not required under B.P. 22.
• It is no defense then that the drawer of the check ordered the bank to
stop payment, if he had no sufficient funds or credit and the check would
have been dishonored had he not made the order. The law regards the
order of stopping payment as a mere pretext of the drawer to avoid
criminal liability. Note: The order to the bank to stop payment of the
check must be without any valid reason.
• A written notice of dishonor is necessary to secure conviction for violation
of B.P. 22. An oral notice of dishonor is insufficent. (Domagsang v. Court of
Appeals)
K.J. Culajara, CPA, JD 19
Illustration
There was a mistake in naming the payee of the check; the drawer ordered the
bank to stop payment; and it appeared that the drawer knew at the time the
check was issued that he had no sufficient funds in the bank. In this case, the
drawer is not liable, even if the check would have been dishonored for
insufficiency of funds had he not ordered the bank to stop payment, because
there was a valid reason (wrong payee) for ordering the bank to stop payment.

Suppose that the drawer had kept sufficient funds in the drawee bank for 100
days from the date appearing thereon to cover the check he had issued. The
next day he withdrew all the funds. When the check was presented later on
that day to the drawee bank, it was dishonored. Is the drawer liable?

K.J. Culajara, CPA, JD 20

Illustration
No. The check was not presented within a period of 90 days from the
date appearing thereon.

K.J. Culajara, CPA, JD 21

Evidence of knowledge of insufficient
funds
• The making, drawing and issuance of a check payment of which is refused by the drawee
because of insufficient funds in or credit with such bank, when presented within 90 days
from the date of the check, shall be prima facie evidence of knowledge of such insufficiency
of funds or credit unless such maker or drawer pays the holder thereof the amount due
thereon, or makes arrangements for payments in full by the drawee of such check within 5
banking days after receiving notice that such check has not been paid by the drawee.
• The element of knowledge and insufficiency of funds or credit is not present and, therefore,
the crime does not exist, when the drawer either –
• Pays the holder of the check the amount due thereon within 5 banking days after receiving notice that
such check has not been paid by the drawee; or
• Makes arrangements for payment in full by the drawee of such check within 5 banking days after
notice of payment.
• Note: Prima facie evidence does not arise where notice of nonpayment is not sent to the
maker or drawer of the check.
K.J. Culajara, CPA, JD 22
Duty of drawee; rules of evidence
• It shall be the duty of the drawee of any check, when refusing to pay the same to the holder
thereof upon presentment, to cause to be written, printed, or stamped in plain language
thereon, or attached thereto, the reason for drawee’s dishonor or refusal to pay the same.
• The fact of insufficient funds in such bank, such fact shall always be explicitly stated in the
notice of dishonor or refusal.
• In all prosecutions under B.P. 22, the introduction in evidence of any unpaid and dishonored
check, having the drawee’s refusal to pay stamped or written thereon, or attached thereto, with
the reason therefor as aforesaid, shall be prima facie evidence of the making or issuance of said
check, and the due presentment to the drawee for payment and the dishonor thereof, and that
the same was properly dishonored for the reason written, stamped or attached by the drawee
on such dishonored check.
• Notwithstanding receipt of an order to stop payment, the drawee shall state in the notice that
there were no sufficient funds in or credit with such bank for the payment in full of such check,
if such be the fact.

K.J. Culajara, CPA, JD 23

Estafa or swindling (Art. 315 of the
Revised Penal Code)
• Any person who shall defraud another… by means of any of the
following false pretenses or fraudulent acts executed prior to or
simultaneously with the commission of fraud:
• By postdating a check, or issuing a check in payment of an obligation
when the offender had no funds in the bank, or his funds deposited
therein were not sufficient to cover the amount of the check. The
failure of the drawer of the check to deposit the amount necessary to
cover his check within 3 days from receipt of notice from the bank
and/or the payee of holder that said check has been dishonored for
lack or insufficiency of funds shall be prima facie evidence of deceit
constituting false pretense or fraudulent act.
K.J. Culajara, CPA, JD 24
Other matters
• Deceit or fraud is an element of estafa or swindling.
• A person may be held liable for both estafa under Art. 315 of the
Revised Penal Code and violation of B.P. Blg. 22 (Anti-Bouncing Checks
Law.)
• A drawer who was acquitted or convicted under Revised Penal Code
for estafa may be prosecuted under B.P. Blg. 22.

K.J. Culajara, CPA, JD 25

The Consumer Act of the
Philippines
Republic Act No. 7394
Declaration of basic policy
• Protect the consumer against hazards to health and safety
• Protect consumers against deceptive, unfair and unconscionable sales
acts and practices
• Provide information and education to facilitate sound choice and the
proper exercise of rights by the consumer
• Provide adequate rights and means of redress, and
• Involve consumer representatives in the formulation of social and
economic policies.

K.J. Culajara, CPA, JD 27

Consumer product quality and safety
• The following are the implementing agencies of the Consumer Act:
• The Department of Health with respect to food, drugs, cosmetics, devices and substances;
• The Department of Agriculture with respect to products related to agriculture, and
• The Department of Trade and Industry with respect to other consumer products not specified above.
• The concerned departments shall establish consumer product quality and safety standards as
to requirements for performance, composition, contents, design, construction, finish,
packaging, kind, class, grade, dimensions, weights, material, methods of sampling, tests and
codes used to check product quality, precautions in storage, transporting and packaging,
marking, clear and adequate safety warnings or instructions, form of warnings or instructions.
• Any consumer product offered for importation shall be refused admission if such product fails
to comply with an applicable consumer product quality and safety standard or rule, has been
determined to be injurious, unsafe and dangerous, substandard, or has material defect.

K.J. Culajara, CPA, JD 28

Prohibited acts
• Manufacture for sale, offer for sale, distribute in commerce, or import into the
Philippines any consumer product which is not in conformity with an applicable
consumer product quality or safety standard promulgated in this Act;
• Manufacture for sale, offer for sale, distribute in commerce, or import into the
Philippines any consumer product which has been declared as banned consumer
product by a rule in this Act;
• Refuse access to or copying of pertinent records or fail or refuse to permit entry of or
inspection by authorized officers or employees of the department;
• Fail to comply with an order issued under Article 11 relating to notifications of
substantial product hazards and to recall, repair, replacement or refund of unsafe
products;
• Fail to comply with the rule prohibiting stockpiling.
K.J. Culajara, CPA, JD 29
Food, drugs, cosmetics and devices
• “Adulterated food” is any food
• That contains any poisonous or deleterious substances which may render it
injurious to health
• That contains any filthy, putrid or decomposed substance, or otherwise unfit
for food
• That has been prepared, packed or held under unsanitary conditions
• That is the product of a diseased animal, or of an animal which has died other
than by slaughter
• In which its container is composed of any poisonous or deleterious substance
which may render the contents injurious to health
• That has passed its expiry date

K.J. Culajara, CPA, JD 30

Food, drugs, cosmetics and devices
• “Adulterated drug and device” is any drug or device –
• That contains in whole or in part of any filthy, putrid, or decomposed substance which may affect
its safety, efficacy or good quality
• That has been manufactured, prepared or held under unsanitary conditions whereby it may have
been contaminated with dirt or filth or whereby it may have been rendered injurious to health
• In which its container is composed, in whole or in part, of any poisonous or deleterious substance
which may render the contents injurious to health
• That bears or contains any color other than a permissible one as determined by the Department,
taking into consideration standards of safety, efficacy or good quality.
• No person shall manufacture, sell, offer for sale, import, export distribute or
transfer any drug or device, unless an application filed with the Department is
effective with respect to such drug or device, and without license from the
Department.

K.J. Culajara, CPA, JD 31

Food, drugs, cosmetics and devices
• “Adulterated cosmetics” is any cosmetics
• That bears or contains any poisonous or deleterious substance which may render it injurious
to users under the condition of use prescribed in the labeling thereof, or under the condition
of use as are customary or usual
• That consists in whole or in part of any filthy, putrid, or decomposed substance.
• That has been prepared, packed or held under unsanitary conditions whereby it may have
become contaminated with filth, or whereby it may have been rendered injurious to health.
• In which its container is composed, in whole or in part, of any poisonous or deleterious
substance which may render the contents injurious to health.
• If it is not a hair dye, those which bear or contain color additive other than which is
permissible.
• If any of its substances has been mixed or packed therewith so as to reduce its quality or
strength or substituted wholly or in parts therefor.

K.J. Culajara, CPA, JD 32

Prohibited acts concerning food, drugs,
cosmetics, and devices
• The manufacture, importation, exportation, sale, offering for sale, distribution or transfer of any food, drug, device or
cosmetic that is adulterated or mislabeled
• The adulteration or misbranding of any food, drug, device, or cosmetic
• The refusal to permit entry or inspection as authorized by Article 36 to allow samples to be collected
• The giving of a guaranty or undertaking referred to in Article 41(b) hereof which guaranty or undertaking is false, except by
a person who relied upon a guaranty or undertaking to the same effect signed by, and containing the name and address of,
the person residing in the Philippines from whom he received in good faith the food, drug, device, or cosmetic or the giving
of a guaranty or undertaking referred to in Article 41(b) which guaranty or undertaking is false
• Forging, counterfeiting, simulating, or falsely representing or without proper authority using any mark, stamp, tag, label, or
other identification device authorized or required by regulations promulgated under the provisions of this Act
• The using by any person to his own advantage, or revealing, other than to the Department or to the courts when relevant
in any judicial proceeding under this Act, any information concerning any method or process which as a trade secret is
entitled to protection
• The alteration, mutilation, destruction, obliteration, or removal of the whole or any part of the labeling of, or the doing of
any other act with respect to a food, drug, device, or cosmetic, if such act is done while such product is held for sale
(whether or not the first sale) and results in such product being adulterated or mislabeled

K.J. Culajara, CPA, JD 33

Prohibited acts concerning food, drugs,
cosmetics, and devices
• The use, on the labeling of any drug or in any advertising relating to such drug, of any
representation or suggestion that an application with respect to such drug is effective under
Article 31 hereof, or that such drug complies with the provisions of such articles
• The use, in labeling, advertising or other sales promotion, of any reference to any report or
analysis furnished in compliance with Section 19 of Executive Order 175, series of 1987
• The manufacture, importation, exportation, sale, offering for sale, distribution, or transfer of
any drug or device which is not registered with the Department pursuant to this Act
• The manufacture, importation, exportation, sale, offering for sale, distribution, or transfer of
any drug or device by any person without the license from the Department required in this
Act
• The sale or offering for sale of any drug or device beyond its expiration or expiry date
• The release for sale or distribution of a batch of drugs without batch certification when
required under Article 34 hereof.

K.J. Culajara, CPA, JD 34

Hazardous substances
• Hazardous substance means any substance or mixture of substances
which is toxic, corrosive, irritant, a strong sensitizer, flammable or
combustible, or generates pressure through decomposition, heat or
other means, if such substance or mixture or substances may cause
substantial injury or substantial illness during or as a proximate result
of any customary or reasonably foreseeable ingestion by children.

K.J. Culajara, CPA, JD 35

Prohibited acts concerning hazardous
substances
• Introduce or deliver for introduction into commerce of any mislabeled hazardous substance or banned
hazardous substance;
• Alter, mutilate, destroy, obliterate or remove the whole or any part of the label of a mislabeled hazardous
substance, or banned hazardous substance, if such act is done while the substance is in commerce or while the
substance is held for sale, whether or not it is the first sale;
• Receive in commerce any mislabeled hazardous substance or banned hazardous substance and the delivery or
preferred delivery thereof at cost or otherwise;
• give the guaranty or undertaking referred to in paragraph (b) of Article 93 and paragraph (b) of Article 45 if
such guaranty or undertaking if false, except by a person who relied upon a guaranty or undertaking which he
received in good faith;
• Introduce or deliver for introduction into commerce or receive in commerce and subsequently deliver or
preferred at cost or otherwise, or a hazardous substance in a reused food, drug, cosmetic or device container
or in a container which, though not a reused container, is identifiable as a food, drug, cosmetic or device
container by its labeling or by other identification. The use of a used food, drug, cosmetic or device container
for a hazardous substance does not diminish the danger posed by the hazardous substance involved,
therefore, such substance shall be deemed a mislabeled hazardous substance.

K.J. Culajara, CPA, JD 36

Other prohibitions
• Deceptive sales acts and practices – an act or practice shall be deemed
deceptive whenever the producer, manufacturer, supplier or seller, through
concealment, false representation of fraudulent manipulation, induces a
consumer to enter into a sales or lease transaction of any consumer product or
service.
• Unfair or unconscionable sales act or practice – an act or practice shall be
deemed unfair or unconscionable whenever the producer, manufacturer,
distributor, supplier or seller, by taking advantage of the consumer’s physical or
mental infirmity, ignorance, illiteracy, lack of time or the general conditions of
the environment or surroundings, induces the consumer to enter into a sales
or lease transaction grossly inimical to the interests of the consumer or grossly
one-sided in favor of the producer, manufacturer, distributor, supplier or seller.
K.J. Culajara, CPA, JD 37
Other prohibitions
• Fraudulent practices relative to weights and measures
• Refusal without any valid legal cause by the total manufacturer or any person
obligated under the warranty or guarantee to honor a warranty or guarantee issued
• Unreasonable delay by the local manufacturer or any person obligated in honoring the
warranty
• Removal by any person of a product’s warranty card for the purpose of evading said
warranty obligation
• False representation in an advertisement as to the existence of a warranty or
guarantee
• Improper labeling and packaging as to registered name or brand, trademark, business
name, address of manufacturer/importer/repacker, general make or active
ingredients, net quality of contents, country of manufacture, etc.

K.J. Culajara, CPA, JD 38

The Price Act
Republic Act No. 7581
Declaration of basic policy
• To ensure the availability of basic necessities and prime commodities
at reasonable prices at all times without denying legitimate business a
fair return on investment.
• To provide effective and sufficient protection to consumers against
hoarding, profiteering and cartels with respect to the supply,
distribution, marketing and pricing of said goods, especially during
periods of calamity, emergency, widespread illegal price manipulation
and other similar situations. 

K.J. Culajara, CPA, JD 40

Prohibited acts
• Price manipulation through
• Hoarding
• Note: There shall be prima facie evidence of hoarding when a person has stocks of any basic necessity
or prime commodity 50% higher than his usual inventory and unreasonably limits, refuses or fails to
sell the same to the general public at the time of discovery of the excess.
• Profiteering – this is the sale or offering for sale of any basic necessity or prime
commodity at a price grossly in excess of its true worth.
• Note: There is a prima facie evidence of profiteering whenever a basic necessity or prime commodity
being sold has no price tag, is misrepresented as to its weight or measurement, is adulterated or
diluted, or whenever a person raises the price of any basic necessity or prime commodity he sells or
offers for sale to the general public by more than 10% of its price in the immediately preceding month.
• Cartel – this is the combination or agreement of two or more manufacturers, processors,
storage owners, suppliers, distributors or sellers of any basic necessity or prime
commodity designed to artificially and unreasonably increase or manipulate its price.

K.J. Culajara, CPA, JD 41

Other matters
• Unless otherwise declared by the President, prices of basic necessities
in an area shall automatically be frozen at their prevailing prices or
placed under automatic price control whenever
• That area is proclaimed or declared as a disaster area or under a state of
calamity
• That area is declared under an emergency
• The privilege of the writ of habeas corpus is suspended in that area
• That area is placed under martial law
• That area is declared to be in a state of rebellion
• A state of war is declared in that area

K.J. Culajara, CPA, JD 42

Other matters
• The President may impose a price ceiling on any basic necessity or
prime commodity under any of the following conditions:
• The impendency, existence, or effects of a calamity
• The threat, existence, or effect of an emergency
• The prevalence or widespread acts of illegal price manipulation
• The impendency, existence, or effect of any event that causes artificial and
unreasonable increase in the price of the basic necessity or prime-
commodity, and
• Whenever the prevailing price of any basic necessity or prime commodity has
risen to unreasonable levels

K.J. Culajara, CPA, JD 43

The Philippine Lemon Law
Republic Act No. 10642
Declaration of policy
• 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.

K.J. Culajara, CPA, JD 45

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 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.
• The following causes of nonconformity shall be excluded:
• Noncompliance by the consumer of the obligations under the warranty
• Modifications not authorized by the manufacturer, distributor, authorized dealer or
retailer
• Abuse or neglect of the brand new motor vehicle
• Damage to the vehicle due to accident or force majeure

K.J. Culajara, CPA, JD 46

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.

K.J. Culajara, CPA, JD 47

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.

K.J. Culajara, CPA, JD 48

Availment of the Lemon Law Rights
• Subsequent to filing 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 final 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 specifications 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 file 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, finally, 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.

K.J. Culajara, CPA, JD 49

Availment of the Lemon Law Rights
• To compensate for the non-usage of the vehicle while under repair and during the 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 official 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.

K.J. Culajara, CPA, JD 50