By Jessie C.Y. Lee & Fang-Yu Wei, Managing Partner & Associate Partner of Formosan Brothers, Attorneys-at-Law

The newly amended “Mandatory and Prohibitory Provisions of Standard Form Contract for the Purchase and Sale of Vehicles” (hereinafter the “Regulations”) has come into effect on July 1, 2021. In addition to referencing the “Lemon Laws” in U.S. law, this amendment also provides many new provisions to protect the rights of car buyers. The following is a brief introduction to the content amended:

Replacement and contract rescission for material defect:

With respect to the number of times a seller may repair a material defect (e.g. “surging” of engine, brake failure, engine stalling, engine overheating, which may be harmful to life, body, health or safety) before the consumer is entitled to request a replacement or rescission of contract, the original Regulations provided that it may be stipulated at will between the parties. As a result, the seller often fills in a higher number of repairs, which is to the disadvantage of the consumer. After the amendment, Article 7 expressly provides that, with respect to material defects beside the sudden burst of flames, the number of repairs the parties may stipulate shall not exceed two. This is provided to protect the rights of the consumers. As to the material defect of sudden burst of flames, before and after the amendment, the consumers were entitled to request a replacement or rescission of contract without going through any repairs.

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As to for how long after the delivery of the vehicle a consumer is entitled to a replacement or rescission of contract for a material defect, the original Regulations provides that the parties may stipulate freely a period of time, which allows the seller to fill in a short time period not in the consumer’s favor. After the amendment, Article 7 expressly provides a minimum time period and distance by stating, “Within ____ days (no less than 180 days) or ______ kilometers (no less than 12,000 kilometers) (whichever comes first) after the delivery of the vehicle” to protect consumers’ rights.

Regarding such material defects, the original Regulations only allow the consumer to exchange for a “vehicle of the same model” or to rescind the contract. After the amendment, considering that the seller may not have a vehicle of the same model to provide a replacement for the consumer, Article 7 adds that the consumer may request a vehicle of the “same value.”

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Replacement and rescission for “lemons”
Referencing the “Lemon Laws” of the U.S., Article 8 is added to provide that if a defect has been repaired for more than four times without avail, or if the total number of days the vehicle is under repair and cannot be used exceeds 30 days, the consumer may request a replacement of the same model or equal value, or rescind the contract. Compared to the conditions required for vehicle replacement or rescission of contract for material defects, the conditions required for vehicle replacement or rescission of contract for a simple “lemon” are stricter and require a higher number of repairs. The specific content of Article 8 (effect of repeated unsuccessful repairs) is: In the event of the following circumstances, the consumer may request a replacement of a new vehicle of the same model (or of equal value) or rescind the contract:

(1) A vehicle cannot be restored to normal functioning after at least four (4) times of repair of the same defect at a facility designated in the maintenance manual within _______ days (no less than 180 days) or ________ kms (no less than 12000 kms) (whichever comes first) of the delivery of the vehicle.

(2) The accumulated number of days that a vehicle is unavailable and under repair at a facility designated in the maintenance manual due to functional defect has exceeded 30 days within _______ days (no less than 180 days) of the delivery of the vehicle. However, the following periods of time shall not be included: 1. the period during which the consumer does not pick up the vehicle under the notice; 2. the reasonable period during which the consumer has been provided with a temporary vehicle or has been reimbursed for transportation. The preceding provision does not affect the rights the consumer may allege in accordance with the law or the seller’s warranty. Article 1 was added to the Regulations to provide that the period of time for contract review is at least three days.

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In addition to the original provision in Article 2 of the Regulations requiring fields such as vehicle make, model, color, exhaust volume, place of origin. on the standard form contract, the amendment adds the field “special stipulation” to avoid disputes in the future between the parties regarding any quality or functionality of the vehicle.

After the amendment, Article 3 of the Regulations provides that, in principle, a deposit shall not exceed 10% of the total price. However, considering that, in practice, when purchasing limited edition cars, customized cars, or cars with optional features, a higher deposit is often stipulated, the amendment provides that under special circumstances, the parties may stipulate a deposit higher than 10%. The amended Article 3 also provides that the annualized interest rate for installment shall not exceed 20%.

Originally, Article 4 of the Regulations provided that for vehicles imported after the purchase and sale contract is entered into, the price shall be calculated using the exchange rate of the actual customs clearance date. This amendment deletes such provision and provides that, except where the parties stipulate otherwise, in principle, the price shall not be adjusted based on changes in exchange rate after the execution of the purchase and sale contract.

(This article was published in the Expert’s Commentary Column of the Commercial Times：https://view.ctee.com.tw/legal/31790.html）

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