Response to Public Feedback Which Raised Concerns
Public feedback
MTI’s response
Definitions and Conditions
The definition of DEFECTIVE has to The Lemon Law regime does not use the word
be more precise. Definition of “defective”. Instead, the Lemon Law provisions
DEFECTIVE must include "any apply in the event of non-conformity to an
unusual, marginally defective or applicable contract (e.g. a sale of goods
abnormal parts which seemingly contract) when express or implied terms of the
looks good, and parts which you contract are breached at the point of delivery,
don't see in similar products in other e.g. the statutory implied term for satisfactory
These terms (“minor defects” and “durability”) are Clarification is sought with respect to not new to the law. These terms proposed in the terms of "minor defects" and section 7A(4) of the HPA can also be found in "durability" as referred to in Section section 14(2B) of the Sale of Goods Act (SGA) 7A(4) of the draft HPA bill as these and section 18(3) of the Supply of Goods Act terms allow (SUGA), and are similar to English law, which in turn forms the basis for the law in most other advantage that the implied terms will be consistent for the different types of contracts and allows reference to case law and academic commentaries interpreting similar provisions elsewhere. If the terms are modified or defined in greater detail, it may affect reliance on such precedents. Specify the number of times that the Given the diverse range of products, it may not be retailer is entitled to repair the possible to specify a reasonable number that can product before the retailer replaces apply to all goods. Nevertheless, the supplier is faulty product with a brand new required to repair or replace within a reasonable product. timeframe, and without causing significant inconvenience to the buyer. Otherwise, the buyer is entitled to ask for rescission or reduction of Request for exchange/refund should There is currently no writing requirement whether be made in writing and not verbally. under existing law (i.e. common law right to reject Service providers should make this goods and get a refund) or the proposed lemon requirement known to the consumer law. This is also not required in similar clearly acknowledgement as proof that this Requiring written notice could prejudice the fact was made known to the consumer since failure will presumably mean that consumer so that there is no dispute consumer will be taken not to have invoked the about this. There should be a lemon law remedies. There is then a possibility that the consumer may lose his right to reject under common law as a result of delays arising The requirement for notice to be in a specific form by the supplier is presumably intended to ensure that the consumer is informed of the requirement for writing to exercise his rights under the new lemon law. However it will be burdensome on businesses and would not be practical to require such notice for every consumer transaction. The proposed amendments make The law should not specify whether the clear that any refund amount may be replacement should be new or used since the reduced to take into account the use circumstances, e.g. condition of the goods at the that the buyer had of the goods. time of replacement, may differ in each case. If However, with regards, to the the buyer is not satisfied with the replacement, he remedy available to the buyer for may reject the replacement and argue that he is replacement of goods, it is not clear entitled to seek a second tier remedy (i.e. whether the transferor is under an reduction in price or rescission). If the obligation to replace the product with replacement a brand new product, or that the circumstances of the case (i.e. having given replacement may be a used product, allowance for wear and tear, it was not equivalent especially when the buyer has had to the goods bargained for in the contract), a substantial use of the product. court is likely to allow the second tier remedy. To avoid further action, the seller should consider whether his dispute resolution policy is effective. Under Section 12D, the seller is There must first be a proven defect for the lemon compelled to reduce the purchase law regime to apply. The court will presume that a price of the Goods, or accept a defect proven to exist within six months of rescission of the sale contract and delivery existed at the time of delivery, unless the reimburse even seller can prove otherwise, or if such a where several months (up to six (6) presumption is incompatible with the nature of the months) has elapsed after delivery of goods (e.g. goods with a short life span). the Goods, if repair or replacement of the goods is 'impossible', or the Under existing law (i.e. Sale of Goods Act), which costs of doing so is 'disproportionate' consumers can already choose to exercise, a to a reduction in the purchase price buyer can reject the goods and claim a refund immediately if the goods do not conform to the contract at the time of delivery. However, if
In the first place, there is no buyers adopt the lemon law regime, they must
for first give the suppliers the opportunity to
„'impossibility', either repair or replace the goods.
inconvenience' and this ambiguity Reduction of price or rescission are available only promotes unnecessary disputes and if the repair or replacement are unavailable litigation. Furthermore, the risk of the because it is impossible or disproportionate for ambiguity in these broad statements the seller, or the seller fails to repair or replace within a reasonable time and without significant inconvenience to the buyer. These terms are not Next, several Goods have short specified consumer attention or life spans in 'disproportionate', or 'significant inconvenience' today's the varies for different types of goods. technological advanced model of There has been no report of any increase in Goods within a few months. Under frivolous actions in the UK following the the amendments however, there will implementation of a similar regime. be an increase in frivolous consumer complaints, as there is strong incentive for customers to insist that repair is (for e.g. 'impossible') after their several months of use, so that the consumer can benefit from a reduction reimbursement. As stated above, the seller will be hard-pressed to 'disprove' nothing to lose by making such frivolous complaints. Notwithstanding provisions whereby Although there is no definition of “rescission” in the consumer is given a right to the proposed legislation, rescission is taken to claim rescission with reimbursement, mean returning the goods and refunding the the amendments are curiously silent purchase price, possibly with a discount for use. on whether, in such case, the consumer is obliged to return the Goods to the seller. This is a logical consequence Amendments should spell out that in The aim of rescission is to return the parties to the the case of discounted or subsidized position they were in before the contract. Since Goods premised on a consumer the goods will be returned to the seller upon contract, the amount of discount or rescission, the seller should return to the buyer subsidy should be repaid to the the amount paid by the buyer. seller the Proposed section 12B(5) provides that the reference to “the amount to be paid” is a reference to the purchase price of the goods. This refers to the actual amount paid by the buyer, as opposed to the value of the goods or listed price of the goods. Therefore the amount to be refunded by the supplier would already be less the discount. The right to claim a refund based on Proposed section 12D (3) states that if the the 'amount to be paid for the transferee transfer of the goods' under Section reimbursement to the transferee may be reduced 12D, is inappropriate. This amount is to take account of the use he has had of the suggestive of the 'price' of the Goods goods since they were delivered to him. at the date of delivery. Significant diminish the market price of the There is no unfairness to the seller since the Goods during the six (6) months rescission is brought about by the fact that the period. However, the proposed goods supplied by the seller did not in fact amendments are silent on whether conform to the contract at the point of sale, and depreciation is a factor that can be the seller would have had the opportunity to taken into account in determining the repair or replace the goods. Based on existing value of the use the consumer has common law, the court has sometimes refused to had of the Goods under Section 12D make any deduction for use because of the (3). It appears that the risk of inconvenience which the buyer has already depreciation has been transferred to suffered in having to deal with the defective the seller when it is not the seller, goods. but the consumer, that is enjoying We note that in the amendments The Proposed amendments to the HPA (relating proposed in the Consultation Paper, mainly to implied terms) and new Part III of the it is unclear whether the amended CPFTA (relating to the new Lemon Law regime) Act will apply only to agreements will not apply to agreements made before the made on or after the amendments amendments come into force. The transitional come into force. provisions will be clearly provided in the We submit that in adherence to the rule of law and the importance of ensuring certainty, the proposed legislative amendments must clearly be stated to be of prospective effect rather proposed amendments to the Act should therefore only apply to agreements made on or after the amendment come into force. The amendments show a distinct The supplier would have the technical know-how legislative bias in favor of the to assess and prove whether or not a defect is consumer, and prejudice the sellers. latent. In addition to there being no plausible justification for this transfer As specified in section 12B(4)(a), the presumption of the burden of proof, it will be close in section 12B(3) (that defects which manifest to impossible for the seller to themselves within 6 months of the date of delivery disprove this presumption (for e.g. to existed at the time of delivery) is rebuttable upon prove damage to the Goods by the proof that the goods did conform at the date of transferee within the six (6) months delivery. In effect, this means that once the buyer period) as the possession of the shows that the defect manifested itself within 6 months, the seller will have the burden of proving that the defect only came into existence later. in the proposed amendments is The six month period is not unreasonably long, significantly inappropriate. We would such that it makes it difficult for the seller to prove propose that a one (1) month period that the defect was not present at the time of themselves delivery. The same presumption can be found in through fair usage. The six (6) EU laws. months period should only apply to latent defects which are not readily discernible notwithstanding a more prolonged use of the Goods. With reference to the proposed The “appropriate amount” of the reduction is not Section 12D(1)(a) of the draft defined as the proper approach is to ask how the much the consumer would have paid for the transferor may be required to reduce goods in their defective state. This is often the amount to be paid for the identical to the amount of damages payable under transfer of the goods in question to the existing law, and which courts are already the transferee by an appropriate practiced in quantifying. amount: First, it is not clear as to what Similar to the principles for calculating damages, constitutes an "appropriate amount". the reduction in purchase price will not take into the account of wear and tear, or time elapsed "appropriate amount". It is not clear between delivery and remedy. as to: tear that would arise as a result of the transferee's usage or substantial usage of the car can be deducted from the "appropriate amount" to be reduced; take into account of "the use the transferee has had of the goods since the goods were delivered to him" appropriate amount that needs to be reduced; and from the date of delivery of the goods to the date as to when the invocation of the Reduction or Rescission Remedy Is made needs to be factored into the computation of the "appropriate amount". Third, It Is proposed that a range of factor be included in the text of the proposed Section 12D to provide indications as to the basis of computing an "appropriate amount". Hire Purchase, Finance and Leasing Association of Singapore (HPFLAS) Section 2 Interpretation CPFTA: It will be clarified that Small Claims Tribunal has Please include the definition of the powers under section 12F of the CPFTA. The "court". Consumer jurisdiction of the Small Claims Tribunal under Act section 5 of the Small Claims Tribunals Act will (CPFTA) was introduced, it was remain unchanged. No definition of “court” is meant to cover low value consumer necessary transactions which could be heard at Interpretation Act already applies. The words the Small Claims Tribunal, hence “court (other than the Small Claims Tribunal)” in only Small Claims Tribunal is defined section 7(4) of the CPFTA would already suggest in Section 2. that “court” includes the SCT unless otherwise Consumers Association of Singapore (CASE) Section 12B(4)(a):- This section Section 12B(4)(a) means that the presumption in seems to suggest that all goods section 12B(3) (that defects which manifest accepted delivery themselves within 6 months of the date of delivery conformed at date of delivery. If so, existed at the time of delivery) is rebuttable upon this would be a loophole that proof that the goods did conform at the date of retailers can exploit. Examples of delivery. In effect, this means that once the buyer such goods would be handphones, shows that the defect manifested itself within 6 furniture and television sets, which months, the seller will have the burden of proving retailers would urge consumers to that the defect only came into existence later (i.e. check at the point of purchase or after delivery). delivery. The feedback on section 12B(4)(a) relates to a However, defective goods do not case where the buyer actually accepts the goods have to appear defective at point of with certain defects at the point of delivery. delivery. If a bed frame looks normal Section14(2C) of the SGA concerns whether at point of delivery but collapses visual inspection would have detected the defect. after a few days, is the retailer If the consumer did in fact examine the goods and obliged under this new legislation to that examination ought to reveal the defect, he repair or replace? will be taken to have agreed to goods with those defects and cannot afterwards complain that those defects are in breach of the implied term of Similarly, if a handphone hangs satisfactory quality. (In the case of sale by frequently after two months of sample, he need not have actually examined the usage, would the handphone be goods and will be taken to have agreed to defects considered a lemon and the retailer which a reasonable examination would have obliged by law to repair or replace? If revealed.) the retailer is not obliged to under both legislation is flawed and the current However, the buyer will not be taken to have situation would not be improved. accepted latent defects (i.e. defects which existed at the time of delivery but could not have been detected then) since examination would not have or It would be impractical to define what is a replacement of the goods: The “reasonable time” or “significant inconvenience” CPFTA is to empower consumers to given the diversity of goods. Thus, Section 12C(5) actively seek redress for themselves. provides that these issues are to be determined Consumers would not be able to by the nature of the goods and the purpose for know what is a reasonable time or which the goods were acquired. what is significant inconvenience. Please provide some examples. The courts will interpret the provisions and Otherwise, this ambiguity could determine disputes. Guidance given by MTI or result in excessive number of claims CASE may be of limited use or even misleading or premature claims being filed at since it would not bind or necessarily reflect Industry associations may adopt codes or guidance for their members as to appropriate dispute resolution practices. Industry standards and guidelines may also indirectly influence the court‟s view. Courts may also refer to the related Explanatory Statement of the proposed Amendment Bill, Second Reading Speech in Parliament and Parliamentary legislation. This information is publicly available on purchase price: We propose that this immediately rely on his rights under general law be a first-tier remedy, along with (e.g. Sale of Goods Act) to do so, as reduction of repair and replacement. Certain purchase price may, in effect, be enforced by defects might exist but consumers claiming damages for breach of contract. Such should be given the option to live damages would usually be based on the with the defect and accept a difference between the amount paid and the value reduction in price. For example, a of the defective goods. fan with a remote control which is not working or an air-conditioner If the goods could be replaced or repaired, this which temperature could not be set may affect the issue of mitigation and costs. For example, if it would have been easier and cheaper to repair it, the damages granted may be limited to the cost of such repairs, or if the consumer refused a reasonable replacement and instead commenced proceedings, he may be penalised in costs. In practice, therefore, unless the consumer wants to reject the goods for a refund, it would be advisable for the consumer to allow the seller to provide repairs or replacement if they are likely to be successful. An advantage of the lemon law regime is that it gives the consumer a clear right to repairs and replacement, whilst setting a limit on unending repairs. It also avoids the possibility that the consumer may lose his right to reject the goods if he allows repair attempts, as the second-tier remedies of price reduction or rescission of contract can still be invoked. Please clarify why a transferee in a References to dealing as a consumer in the sale by auction is not regarded as proposed Lemon Law regime (proposed section dealing as consumer -Paragraph 12A(2) of the CPFTA) is based on the Unfair 2.3. Explanatory Notes Contract Terms Act, which do not include a buyer in a sale by auction or competitive tender. This is because in a sale by auction, goods are usually sold “as seen” and it would not be appropriate to impose some of the implied terms in such contexts. Cars or Hire Purchase
The obligations under the Proposed Under a hire purchase agreement, the finance HPA Implied Terms should be company pays the seller and becomes the owner imposed on the Responsible Parties of the vehicle. The hirer does not become the and not the auto finance providers. It then becomes apparent that the Proposed Terms As owner of the vehicle, the finance company is causes exceptional and considerable already bound by the implied terms under the hardship to auto finance providers existing HPA, including merchantability. The who are typically not well-acquainted proposed with the product knowledge of the satisfactory quality for merchantability, for cars, and who have only contributed consistency with the SGA and SUGA. of car transaction. In view of the above, the HPFLAS would like to call Section 7, which imposes liability on the owner for the even for agents of the dealer, is already in applicability of the Proposed HPA existence. Implied Terms to auto finance providers. The position is similar in UK, Ireland and NZ, where the finance company is held liable until Hire Purchase, Finance and Leasing ownership is transferred to the hirer. Association of Singapore (HPFLAS) be Proposed section 7C in fact benefits the owner afforded greater protection under and gives non-consumers a lower level of CPFTA and HPA, non-consumers protection than consumers. In the case of (i.e. persons who do not deal as consumers, the listed implied terms are treated as consumers), who possess stronger conditions, meaning that breach of those terms bargaining the will give rise to the right to reject the goods even consumers in concluding contracts, for slight defect. Whereas, non-consumers will not should any have a right to reject for slight defects because protection even if protection is the implied term is treated as a warranty. These limited to that of warranties. Further, warranties mirror those available to non-the whole purpose of introducing consumers under the existing Sale of Goods Act lemon laws is to introduce consumer and Supply of Goods Act. protection remedies for the consumers and not the non-consumers. Accordingly, HPFLAS submits that there is no rationale behind enacting the proposed Section 7C of the draft HPA bill ("Section 7C1 that provides that a breach of the implied terms in sections 7, 7A or 7B(1)(s) or (c) is treated as a breach of warranty instead of a breach of condition, unless a contrary intention appears from the agreement). HPFLAS would therefore like to urge MTI to consider withdrawing the Proposed Section 7C from the draft HPA bill. Hire Purchase, Finance and Leasing Association of Singapore (HPFLAS) The condition implied by Section This provision provides for the special case of 7A(6) should be read as the fitness for a particular purpose which has been exception and not the rule and we made known to the owner or dealer. would be grateful if clarification on this can be given. It is further Section 6(3) in the existing HPA provides submitted that the word 'particular purpose‟ can potentially be given a similarly, except that there is an express provision excluding secondhand goods if there is an very broad interpretation and it is not express statement to the effect and it is proven clear as to whether 'particular that the hirer acknowledged the statement in purpose' should be construed in a writing. restrictive sense and clarification as to Proposed section 7A(6) is in fact less prescriptive than the existing provision. The implied term is excluded if the circumstances show that the hirer Hire Purchase, Finance and Leasing does not rely, or it is unreasonable for him to rely, on the skill and judgment of the owner or dealer. This exception is not limited to secondhand goods and no written acknowledgment is required. New section 7A(5) also provides other means of by which the implied term may be excluded. It is proposed that Section 12C(5) of Not accepted. The issues of reasonable time and the draft CPFTA bill be revised to significant inconvenience merely determine when include the following new Section the consumer can proceed to demand a second 12C(5)(c) so as to ensure that the tier remedy i.e. reduction in price or rescission. potential difficulties faced by the The repair/replacement expeditiously to meet the "the relevant circumstances of the consumer‟s needs should not delay the consumer transferor when the request to from enforcing his rights by alternative means. repair or replacement under Section 12C(1) of the Act is invoked." Moreover, it should be noted that under general law (SGA), if the goods supplied were not in conformity with what was contracted for, the consumer could have enforced his rights to reject Section 12 C(5):- Any question as to the goods (similar to the second tier rights) what is a reasonable time or immediately. significant inconvenience is to be determined by reference to - This proposal could result in substantial delay to (b) the purpose for which the goods the consumer in enforcing his rights. were acquired. Hire Purchase, Finance and Leasing Association of Singapore (HPFLAS) Please clarify why Section 7, which Agree to retain existing section 7. This provision makes for gives the hirer the same rights to rescind the acting on behalf of the owner, is misrepresentations, warranties and statements proposed to be deleted. made by the owner or dealer‟s agents. Existing section 7 also provides an indemnity for the owner (usually the finance company) against the Scope of Coverage
The law should be extended to cover The remedies under the lemon law regime are the provision of services where tailored for goods, and are generally inappropriate currently there is little recourse for for services. For example, it is impossible to consumers who do not receive the return the service which has already been services they have paid for. Moulmein Farrer Park Residents‟ Moreover, one key intent of the Lemon Law Committee regime is to provide recourse for latent defects, which does not arise in relation to the supply of services. Save for used cars, new cars will The section applies to both new and used cars. typically only be delivered after the hire purchase agreement has If section 7A(5)(b) is incapable of applying to new been executed. In such an vehicles because the consumer does not have an instance, the examination referred opportunity to examine them, then the exception to in Section 7A(5)(b) of the draft to the implied term of satisfactory quality under HPA bill can possibly never take section 7A(5) simply does not apply. The place save for a used cars scenario. consumer will then retain the benefit of the Clarification as to the applicability of implied term. Section 7A(5)(b) to new cars is therefore sought. Hire Purchase, Finance and Leasing Association of Singapore (HPFLAS) Section 12A Interpretation of this No, the intention is to apply the lemon law regime Part:"applicable contract" means (c) only to contracts for the sale of goods, contracts a contract of hire. Does this mean for the transfer of property in goods (referred to as that leasing of goods, for example, contracts leasing of motorcar and photocopy agreements. machine for private use is covered? Consumers Association of Singapore (CASE) We note that Sections 6 and 7 of the The implied term of merchantability/satisfactory existing Hire-Purchase Act would be quality applies to secondhand goods under both either completely the existing and proposed HPA:- see section 6(2) proposed of existing HPA, and new section 7A(2) of legislation. In particular, we note that proposed the sub-sections on second-hand recognises that the reduced price reflects the risk goods would be deleted. Please that the secondhand goods are more likely to advise whether this means second- develop faults:- see new section 7A(3) of the hand goods are also subject to the proposed HPA. implied condition of satisfactory The quality of the goods will not be rendered unsatisfactory by any matter specifically drawn to the attention of the hirer before the agreement is made (section 7A(5)(a)) or, if hirer examines the goods, would be revealed by that examination (section 7A(5)(b)). Responsibility of Retailer vs Supplier
Some resellers may have their own The new Lemon Law provisions do not exclude refund/exchange policies for each of consumers from their existing rights, including their customers. Such customers under warranties and exchange policies. That is, may, a consumers can still seek redress from the refund/exchange from the reseller in manufacturer under any warranties or exchange reliance of the new regulations, rely policies of the manufacturer instead. on the warranty provided by the authorized The retailer may seek recourse against his supplier based on his contract with the supplier, or exercise his rights under the Sale of Goods Act as a purchaser in respect of the supplier (i.e. the These provisions should not apply implied terms for non-consumers under the Sale between a buyer and seller where of Goods Act are likely to apply). the goods are subject to an underlying product warranty. In this instance, the buyer, who deals as a consumer, has a lateral right against the product manufacturer and the seller should therefore not be caught by the proposed provisions under the new Part III of the Act. The established practices in the market place will be affected, but without necessarily benefiting the consumer. choose to relinquish their warranty obligations to the consumer, and leave the sellers to directly address customer confirming Goods. Sellers are ill-equipped to do so, and will be forced to arrangements (at their own costs as stipulated in Section 12C(2)(b)) with the increased operational inefficiency and higher costs down the chain. These costs will inevitably have to be passed down to the consumers by way of costlier Goods. There is no longer any incentive for sellers to offer 'no questions asked' exchange policy where the Goods are brought back to the seller within 7-10 days of purchase. Generally, transactional flexibility and beneficial consumer-centric voluntarily offered by sellers to consumers in the market place will be diminished in light of the over-regulation It is also noted that cars are often sold manufacturers, authorized dealers of manufacturers or new and used car dealers. In such a case, the safeguards in the proposed HPA amendments would only serve to add costs without value and facilitate as a duplicate remedy for the consumers. Hire Purchase, Finance and Leasing Association of Singapore (HPFLAS) In terms of logistics, in lieu of just Lemon Law provisions do not exclude consumers one of from their existing rights, including under possession) of Goods from the warranties. Consumers can continue to exercise consumer to the manufacturer for their rights to seek repairs from manufacturers repairs, there would be two, i.e. one directly. from the consumer to the seller, and However, the new regulations would allow the other from the seller to the additional remedies, such as replacement, should manufacturer, leading to logistical a product be defective. In a dispute involving retailer and Contractual liability only binds the parties to the authorized distributor/service centre, contract. If it was the retailer who entered into a the law should make it clear which sales contract with the consumer, the retailer will party the be directly responsible for the exchange/refund. the retailer will direct the consumer The retailer may seek recourse against his to the party issuing the warranty, supplier based on his contract with the supplier, which is fine provided the distributor or exercise his rights under the Sale of Goods Act in turn does not re-direct the as a purchaser in respect of the supplier (i.e. the consumer to the retailer on the basis implied terms for non-consumers under the Sale Consumers Association of Singapore (CASE)



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