Taming of the shrew(d)

By Atty. Eduardo T. Reyes III

June (not her real name) went to a store selling smart phones.  She has just graduated from college and started her job as a teacher. With her meagre salary, she saved every penny she could to buy the smart phone of her dreams.

Once inside the store, the attendant showed her all the bells and whistles of the new smart phone the store is selling. When convinced, June was asked to sign a prepared form where the “warranty period” was stated as within “24-hours from purchase.”

June went home. Their house is in a suburb just outside Iloilo City. She tinkered with her new smart phone and went to bed. The next day, her smart phone was malfunctioning. She hurried back to the seller who told her that the “warranty” has expired because more than 24 hours have passed from the time of purchase.

Is the store policy of limiting the warranty period to 24 hours only valid?

It is void for two (2) reasons.

First, the prepared contract is one known as a “contract of adhesion” which may be nullified by the court if it finds that the seller had an undue advantage over the buyer/customer.

In Estrella Pabalan v. Vasudave Sabnani, G.R. No. 211363, which came down on February 21, 2023,  it was held that “The Court must review the context and facts surrounding the transaction. It should consider all significant circumstances such as if the contract was one of adhesion or one reached through fair and arm’s length negotiations. It should look into how the agreement was reached. Did the parties have equal bargaining power during the negotiation stage such that either of them had the power to accept or deny the proposals of the other? Were the terms and conditions of the agreement clearly communicated to both parties? What were the reasons of each party for consenting to the agreement?”

In June’s case, she was at the mercy of the store as she is untrained in the technical nuances of the product. The store was surely in a much better position to check the viability of the product before selling it to an unsuspecting customer.

Too, by making June sign a prepared contract which is deemed one “of adhesion,” she had no bargaining power of any kind to ask for a longer period of warranty. It was a “take-it-or-leave-it” deal that June was forced to enter into.

Second, the Consumer Act holds a supplier liable for “product imperfections.” It was held in Mazda Quezon Avenue v. Alexander Caruncho, G.R. No. 232688, April 26, 2021, that:

“ARTICLE 100. Liability for Product and Service Imperfection. ­ The suppliers of durable or non-durable consumer products are jointly liable for imperfections in quality that render the products unfit or inadequate for consumption for which they are designed or decrease their value, and for those resulting from inconsistency with the information provided on the container, packaging, labels or publicity messages/advertisement, with due regard to the variations resulting from their nature, the consumer being able to demand replacement to the imperfect parts.

If the imperfection is not corrected within thirty (30) days, the consumer may alternatively demand at his [or her] option:

1. the replacement of the product by another of the same kind, in a perfect state of use;
2. the immediate reimbursement of the amount paid, with monetary updating, without prejudice to any losses and damages;
3. a proportionate price reduction.”               

Clearly, stores like the one that June has unfortunately transacted with cannot skirt liability by simply preparing a ready-to-sign contract that limits their liability to only a short period of time, ie., 24 hours. Still in Mazda Quezon Avenue, it was underlined that:

“Petitioner cannot escape liability by referring to its Warranty Information and Maintenance Record provisions, which only require it to maintain and service the vehicle without charge. That it did so does not free it from the operation of and its liability under the Consumer Act. More specifically, the law allows the consumer the remedy of full reimbursement.”

Indeed, honesty and fair dealing should be the mantra of every merchandise seller. Business should not be operated solely for profits but must reckon the consumer’s rights.

Sellers must be mindful of laws that protect the consumer.

The shrewd business owner must be tamed by these laws.

(The author is the senior partner of ET Reyes III & Associates– a law firm based in Iloilo City. He is a litigation attorney, a law professor, MCLE lecturer, bar reviewer and a book author. His website is etriiilaw.com).