Public Consultation Lemon Law

Closed on 16 DEC 2010

Introduction

The Ministry of Trade and Industry (MTI) is seeking feedback on the proposed amendments to the Consumer Protection (Fair Trading) Act ("CPFTA") and the Hire Purchase Act (HPA) to include provisions for the repair and replacement of defective goods.

"Lemon laws" refer to consumer protection laws that provide remedies for consumers against latent defects in goods, colloquially known as "lemons", which fail to meet standards of quality and performance, especially after repeated repair. The Lemon Law Taskforce, led by MTI and the Consumers Association of Singapore (Case), and comprising members of consumer and public agencies, was formed in September 08. Its aim is to determine if there was a need for such laws in Singapore and, if so, the appropriate scope and form they should take.

The Taskforce found that most of the key features of lemon laws, as implemented in developed economies, were already present in Singapore"s legislation. For instance, the Sales of Goods Act (SGA), which applies to any contract in which the seller transfers or agrees to transfer property in goods to the buyer for money, imposes implied terms and conditions in the contract. For example, goods are to be of satisfactory quality and fit for any particular purpose of which the buyer had, expressly or by implication, informed the seller. A consumer is entitled to reject the goods and obtain a refund for breach of the implied condition of satisfactory quality.

However, there is currently no express provision in the law on the rights of consumers to obtain repairs or replacements for defective goods.¹ The Taskforce hence recommended that express provisions for repair and replacement be added to empower consumers to actively seek these remedies from retailers, and to give greater latitude to the courts when considering what remedies to award to a consumer.

Such provisions will help consumers with retailers who refuse to replace defective goods after multiple failed attempts to repair. Statistics from Case show that the complaint rate for defective goods across different product categories is very low (with the highest at only 0.1%). However, when such complaints arise, they can be difficult to resolve due to lack of clarity over when consumers have the right to ask for the repair and replacement of their goods.

Following consultation with the Law Reform Committee (LRC) of the Singapore Academy of Law (SAL), the Taskforce's recommendations are being considered for implementation by:

a) Adopting the UK Sale and Supply of Goods to Consumers Regulations 2002 ("CSD Regulations"²) as the model to add express provisions for repair and replacement. The CSD Regulations (details in Annex A [PDF, 57 KB]) provide a balanced and practical model (e.g. by providing alternative remedies when repair or replacement is not possible). The remedies do not affect existing remedies for breach of contract under the common law and other legislation.³

b) Applying the provisions for repair and replacement to hire purchase contracts to allow coverage of car purchases, which are mostly made under hire purchase agreements.

Key Legislative Amendments

Consolidating the provisions for repair and replacement in the CPFTA will provide a simpler reference for consumers, as compared to reproducing the provisions in all relevant Acts which govern consumer transactions: i.e. the SGA, Supply of Goods Act (SUGA)⁴, and HPA. Specifically, it is proposed that the following provisions, modelled after the CSD Regulations, be added to the CPFTA:

a) Right to demand repair or replacement. Where there is non-conformity with contract (e.g. breach of implied term of satisfactory quality) by the seller, the buyer may require the seller to repair or replace the goods. The court will presume that a defect proven to exist within six months of delivery existed at the time of delivery, unless the seller can prove otherwise or if such a presumption is incompatible with the nature of the goods.⁵ This makes it easier for consumers to establish that the goods did not conform to their contract at the time of delivery, and to use the proposed remedies. The seller must repair or replace the goods within a reasonable period of time without causing significant inconvenience to the buyer and bear any necessary costs incurred.

b) Alternative remedies of reduction in price or refund. Where repair and replacement costs are disproportionate, or where the seller has failed to repair or replace the goods within a reasonable time or without significant inconvenience, the buyer may ask for a reduction in price or return the product for a refund. The refund amount may be reduced to take into account the use that the buyer had of the goods.

Details on the proposed legislative amendments to the CPFTA and the related explanatory notes can be found in Annexes B [PDF, 196 KB] and Annexes C [PDF, 73 KB] respectively.

To extend the provisions for repair and replacement to hire purchase agreements, the following amendments to the HPA are proposed:

a) Update of implied terms. The implied terms in the HPA have to be made consistent with those in the SGA and SUGA. The changes include updating the implied term of "merchantable quality"⁶ in the HPA to that of “satisfactory quality”, and adopting the definition of “dealing as consumer”⁷ in the part of the HPA relating to the implied terms.These changes will give greater clarity to consumers, who can rely on the breach of the same implied terms to trigger the new provisions for repair and replacement, regardless of whether their purchase are made under a hire purchase or normal sales agreement.

b) Removal of value caps on HPA's implied terms. Currently, all provisions in the HPA, including implied terms of hire purchase agreements, apply only to consumer goods of value not exceeding $20,000 and motor vehicles of value not exceeding $55,000 (excluding COE). These value caps should not apply to the HPA's updated implied terms as consumers will otherwise not be able to rely on breach of these implied terms to trigger the new provisions for repair and replacement, if the values of their goods exceed the caps.

Details on the proposed legislative amendments to the HPA and the related explanatory notes can be found in Annexes D [PDF, 344 KB] and Annexes E [PDF, 91 KB] respectively.

Mode of Consultation

MTI seeks feedback on the proposed amendments to the CPFTA and HPA. MTI will review the submissions and make changes, where appropriate.

All submissions should be clear and concise, and should provide a reasoned explanation for any proposed revision to the proposed amendments. Where feasible, parties should identify the specific clause of the proposed amendments to the Acts, or specific paragraph of the consultation paper on which they are commenting. Where parties choose to suggest revisions to the text of the proposed amendments to the Acts, they should state clearly the specific changes to the text that they propose.

Parties submitting comments should include their personal/company particulars as well as their correspondence address, contact numbers, and email addresses on the cover page of their submissions.

MTI reserves the right to make public all or parts of any submission and to disclose the identity of the author. Parties may request that any part of the submission that they believe to be proprietary, confidential, or commercially sensitive be kept confidential. Any such information should be clearly marked and placed in a separate annex. Where MTI agrees with the request, it will consider the information but will not publicly disclose it. If MTI rejects the request, it will not consider the information and will return the information to the party. As far as possible, parties should limit any request for confidential treatment of information submitted.

^[1]In cases brought before the Small Claims Tribunal (SCT), however, the SCT has the power to order the rectification of goods including the replacement of goods or parts thereof.

^[2] CSD refers to "Consumer Sales Directive".

^[3] The consumer may still reject the goods or terminate for breach of contract under existing law without first seeking the remedies under the new provisions. If the consumer has sought repairs or replacement under the new provisions, he must give the seller reasonable time to do so before seeking other remedies.

^[4] The SUGA applies to contracts for the transfer of goods and services, such as lease or hire contracts, contracts for work and materials, bailment or barter. It applies implied terms similar to those under the SGA in the context of contracts for the supply of goods.

^[5] The same presumption can be found in EU laws.

^[6] "Merchantable quality" was considered out-moded as its focus on fitness for purpose did not adequately reflect the importance of other aspects of quality such as appearance and finish in the context of consumer transactions. Similar amendments were made to the SGA and SUGA in 1996.

^[7] The HPA currently applies to "consumer goods", as defined under the Act, which may result in a narrower coverage compared to the SGA and SUGA's definition of dealing as consumer'.