REPUBLIC ACT No.

6552

AN ACT TO PROVIDE PROTECTION TO BUYERS OF REAL ESTATE ON

INSTALLMENT PAYMENTS. (Rep. Act No. 6552)

Section 1. This Act shall be known as the "Realty Installment Buyer Act."

Section 2. It is hereby declared a public policy to protect buyers of real estate on

installment payments against onerous and oppressive conditions.

Section 3. In all transactions or contracts involving the sale or financing of real estate
on installment payments, including residential condominium apartments but
excluding industrial lots, commercial buildings and sales to tenants under Republic
Act Numbered Thirty-eight hundred forty-four, as amended by Republic Act
Numbered Sixty-three hundred eighty-nine, where the buyer has paid at least two
years of installments, the buyer is entitled to the following rights in case he defaults
in the payment of succeeding installments:

(a) To pay, without additional interest, the unpaid installments due within the
total grace period earned by him which is hereby fixed at the rate of one month
grace period for every one year of installment payments made: Provided, That
this right shall be exercised by the buyer only once in every five years of the life
of the contract and its extensions, if any.

(b) If the contract is canceled, the seller shall refund to the buyer the cash
surrender value of the payments on the property equivalent to fifty per cent of
the total payments made, and, after five years of installments, an additional five
per cent every year but not to exceed ninety per cent of the total payments
made: Provided, That the actual cancellation of the contract shall take place
after thirty days from receipt by the buyer of the notice of cancellation or the
demand for rescission of the contract by a notarial act and upon full payment of
the cash surrender value to the buyer.

Down payments, deposits or options on the contract shall be included in the

computation of the total number of installment payments made.lawphi1™

Section 4. In case where less than two years of installments were paid, the seller shall
give the buyer a grace period of not less than sixty days from the date the installment
became due.
If the buyer fails to pay the installments due at the expiration of the grace period, the
seller may cancel the contract after thirty days from receipt by the buyer of the notice
of cancellation or the demand for rescission of the contract by a notarial act.

Section 5. Under Section 3 and 4, the buyer shall have the right to sell his rights or
assign the same to another person or to reinstate the contract by updating the account
during the grace period and before actual cancellation of the contract. The deed of
sale or assignment shall be done by notarial act.

Section 6. The buyer shall have the right to pay in advance any installment or the full
unpaid balance of the purchase price any time without interest and to have such full
payment of the purchase price annotated in the certificate of title covering the
property.

Section 7. Any stipulation in any contract hereafter entered into contrary to the
provisions of Sections 3, 4, 5 and 6, shall be null and void.

Section 8. If any provision of this Act is held invalid or unconstitutional, no other

provision shall be affected thereby.lawphi1™

Section 9. This Act shall take effect upon its approval.

Approved: August 26, 1972.

 INSTALLMENT SALES LAW

What is the Installment Sales Law?

Commonly known as the Recto Law. It is embodied in Art. 1484 of the NCC which
provides for the remedies of a seller in the contracts of sale of personal property by
installments.

Note: Art. 1484 of the NCC incorporates the provisions of Act No. 4122 passed by the
Philippine Legislature on Dec. 9, 1939, known as the "Installment Sales Law" or the
"Recto Law," which then amended Art. 1454 of the Civil Code of 1889.

To what does the Recto Law apply?

This law covers contracts of sale of personal property by installments (Act No. 4122).
It is also applied to contracts purporting to be leases of personal property with option
to buy, when the lessor has deprived the lessee of the possession or enjoyment of the
thing. (PCI Leasing and Finance Inc. v. Giraffe-X Creative Imaging, Inc., G.R. No.
142618, July 12, 2007)

What are the alternative remedies in case of sale of personal property in installments?

1. Specific Performance: Exact fulfillment should the buyer fail to pay

General Rule: If availed of, the unpaid seller cannot anymore choose other remedies;

Exception: if after choosing, it has become impossible, rescission may be pursued

2. Rescission: Cancel the sale if buyer fails to pay 2 or more installments Deemed
chosen when:

a. Notice of rescission is sent

b. Takes possession of subject matter of sale

 c. Files action for rescission

3. Foreclosure: Foreclose on chattel mortgage if buyer fails to pay 2 or more

installments

General Rule: Actual foreclosure is necessary to bar recovery of balance - Extent of

barring effect: purchase price

Exception: Mortgagor refuses to deliver property to effect foreclosure; expenses

incurred in attorneys fees, etc.
 Republic of the Philippines
CONGRESS OF THE PHILIPPINES
Metro Manila

Sixteenth Congress
First Regular Session

Begun and held in Metro Manila, on Monday, the twenty-second day of July, two
thousand thirteen.

REPUBLIC ACT NO. 10642

AN ACT STRENGTHENING CONSUMER PROTECTION IN THE PURCHASE OF

BRAND NEW MOTOR VEHICLES

Be it enacted by the Senate and House of Representatives of the Philippines in Congress

assembled:

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 defined, 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 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;
(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
specifications 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;

(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 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 first twenty thousand (20,000) kilometers of operation after
such delivery, whichever comes first. This shall be the period during which the
consumer can report any nonconformity, as defined in paragraph (k) herein, to
the standards and specifications 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 specifications,
which cannot be repaired, but excluding 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, 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) Warranty 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 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:

(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.

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 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
deemedsuccessful: 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.
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.

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;

(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 qualified 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 bornejointly 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 specifications
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 certificate 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 filing 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.

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

(2) 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:

(i) Replace the motor vehicle with a similar or comparable motor

vehicle in terms of specifications 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 specifications 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 defined 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.

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

Officer which completely disposes of the case within fifteen (15) days
from receipt thereof.1âwphi1 The appeal shall be taken by filing a
Memorandum of Appeal with the Secretary of the DTI, with Notice of
Appeal to the Adjudication Officer, 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) days from
receipt thereof. A party seeking further appeal from the decision of the Secretary of
the DTI may file 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 first
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 officer 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 fifteen (15) days after its
publication in the Official Gazette or in any newspaper of general circulation.