Monday, 20 May 2013

Dealing with lemons - Singapore style

Singapore’s Lemon Laws came into effect on Sept 1, 2012 via amendments to the Consumer Protection (Fair Trading) Act, the Hire Purchase Act and the Road Traffic Act. The Lemon Law provides consumers with statutory remedies against goods that fail to conform to the agreed terms of contract, or are defective, or of unsatisfactory quality at the time of delivery.


Guanyu 道 said...

Dealing with lemons - Singapore style

Robson Lee, Business Times
16 May 2013

Singapore’s Lemon Laws came into effect on Sept 1, 2012 via amendments to the Consumer Protection (Fair Trading) Act, the Hire Purchase Act and the Road Traffic Act. The Lemon Law provides consumers with statutory remedies against goods that fail to conform to the agreed terms of contract, or are defective, or of unsatisfactory quality at the time of delivery.

Retailers cannot contract out of the Lemon Law with contractual sale terms such as “Goods sold are not refundable”, or the product is purchased on an “as-is condition”.

The Lemon Law does not apply if the consumer purchased and accepted delivery with knowledge of any defect, or a visual examination of the product before the sale would have revealed the defect.

The Lemon Law covers all physical goods, including second-hand goods and vehicles and hire-purchase goods. The court will consider the age, price paid, and the reasonable condition of similar second-hand goods in adjudication of a claim. Like the European Union and United Kingdom, goods purchased on-line are also covered. However, the legislative ambit excludes services, rental or leased goods, real estate properties and financial products.

Framework of application

The Lemon Law contains a rebuttable statutory assumption in favour of the consumer that a defect exists in a product within six months of delivery unless the seller proves otherwise. This presumption does not apply to goods with a normal shelf-life of less than six months (such as perishables like food and beverage items). A consumer seeking to rely on the Lemon Law outside the six-month period must prove that the defect existed at the time of delivery. Defects caused by misuse, wear and tear, and unauthorised repairs or alterations have no recourse under the Lemon Law.

Two-stage right of recourse

Consumers have the right to require a seller to repair or replace a defective product within a reasonable time, and without causing significant inconvenience to the consumer.

Consumers may keep the defective good and request for a reduction in price or return it for a refund only when:

(i) repair or replacement is impossible or disproportionately costly; or

(ii) the seller did not provide repair or replacement within a reasonable time and without significant inconvenience to the consumer.

What is a Lemon?

The Lemon Law applies when there is non-conformity to contract at the time of delivery. The Singapore Sale of Goods Act (“SOGA”) defines the term “non-conformity to contract” as including products that are of unsatisfactory quality, unfit for the intended purpose of purchase, or do not meet reasonable expectations of performance, while considering factors such as description and price.

The term “satisfactory quality” includes, among other things, the state and condition of a good, fitness for the purpose(s) for which goods of such nature are commonly supplied, appearance and finishing, and safety and durability.

In determining whether repair or replacement is disproportionately costly, the court will consider the:

(a) significance of the non-conformity to the contract terms;

(b) value of the goods if they conform to contract; and

(c) availability of alternate remedies that do not cause significant inconvenience to the consumer.

Except for cars, the law does not prescribe the number of times a retailer may repair a product before replacement. Repairs need only be effected within a reasonable timeframe without causing significant inconvenience to the consumer.

The law provides considerable latitude to the court to adjudge what constitutes “reasonable time” and “significant inconvenience”, applying common-sense principles of fairness and equity, and considering the nature and purpose for which the goods were purchased. A prescriptive approach would make application of the Lemon Law inoperative and vexatious, and prevent consumers and retailers from resolving disputes amicably.

Guanyu 道 said...

The law also does not prevent a retailer from deploying a used or repaired product as a “proper replacement” provided the replacement conforms to contract, that is, it is of the quality, make, model and condition expected at the point of contract. If the consumer is dissatisfied with the replacement, he can request for a price reduction or return the replacement for a refund.

Under the Lemon Law, a retailer who contracts with a consumer must provide the statutory remedy although the retailer did not manufacture the good in question. A retailer may only return faulty goods to its supplier under SOGA.

The Lemon Law does not preclude a consumer from seeking separate recourse against a manufacturer under a product warranty.

Cars and hire purchase

In Singapore, cars are extremely big-ticket items. The Lemon Law allows for the Additional Registration Fee and Certificate of Entitlement from a defective car to be transferred to a replacement vehicle within one year of the vehicle’s registration or the first 20,000 kilometres, whichever is earlier, and at least three repair attempts have failed to correct the defect. If the defect is safety-related, the consumer may seek replacement after the first failed repair attempt within one year from the date the defect was reported.

When a dealer acquires a trade-in vehicle and on-sells it, only the end-customer may seek recourse under the Lemon Law. As the Lemon Law applies only to transactions between businesses and consumers, the dealer may not seek recourse under the Lemon Law against the customer it purchased the defective vehicle from.

However, the dealer may sue the trade-in customer under SOGA. The dealer can protect itself by clearly stipulating in the contract with the trade-in customer the dealer’s right to rescind the transaction in the event of serious defects or non-conformity to contract.

Singapore’s Lemon Law is similar to statutory provisions relating to hire purchase products in the UK, New Zealand and Ireland. The finance company is responsible for processing Lemon Law-related claims from the hirer. Under a hire purchase agreement, the hirer does not become the owner until the final payment is made. Consequently, the finance company is liable to the hirer for Lemon Law-related claims until ownership is transferred to the hirer. The finance company can protect itself by first contracting with the seller to obtain appropriate warranties and indemnities in the event the hire-purchase product is defective.

Lemon Law in the USA

Each US state has different statutory provisions governing Lemon Law. A consumer should consult lawyers practising in the relevant state(s) in pursuing claims for lemon(s) purchased from US retailer(s).

Notwithstanding the different state Lemon Laws, the Magnuson-Moss Warranty Act is a comprehensive federal statute on consumer product warranties. The Act regulates implied warranties of merchantability and express product warranties on consumer products from a manufacturer or seller and improves consumers’ access to warranty information by encouraging warranty competition from manufacturers and suppliers. The Act also promotes timely and complete performance of warranty obligations, thus making it easier for consumers to sue for breach of product warranty, as such a breach constitutes violation of federal law. Consumers are permitted to recover court costs and reasonable legal fees.

The Lemon Law is a significant milestone for consumer protection in Singapore. However, it will take some time for Singapore to progressively evolve its culture of consumer protection and further entrench consumer rights to the robustness of consumer rights in the US.

The writer is a partner at Shook Lin & Bok LLP

The content of this article represents the personal views of the author and not the firm