Category Archives: Consumer Law

THE SALE AGREEMENT: CAN I USE THE COOLING-OFF PERIOD IF I CHANGE MY MIND?

The Consumer Protection Act has some serious implications for agents selling property – for one, a disgruntled purchaser can get out of a sale agreement within 5 days of signing it.

Section 16 of the Consumer Protection Act states as follows:

“A consumer may rescind a transaction resulting from any direct marketing without reason or penalty, by notice to the supplier in writing …, within five business days after the later of the date on which

  1. The transaction or agreement was concluded; or
  2. The goods that were the subject of the transaction were delivered to the consumer.”

However, the CPAs Cooling-Off Period will not help you when you change your mind. People are under the misconception that the CPA protects them, by providing the “cooling-off period”.

The Alienation of Land Act

In terms of The Alienation of Land Act, residential property transactions of R 250 000.00 or less are subject to a “cooling-off” period of five working days, calculated from the date of signature of the Offer to Purchase. It does not apply to residential properties sold for more than R 250 000.00. This provision remains in place and is not affected by the CPA.

A Purchaser who purchases a property, as a result of direct marketing, has the right to cancel the sale within five business days – the “cooling-off” period. This applies only to sales that result from direct marketing.

Direct marketing in terms of the Act includes to “approach” a person (i) in person, (ii) by mail or (iii) by electronic communication (this includes email and sms) for the purpose of promoting or offering to supply goods or services to the person.

The “cooling-off” period does not apply to sales that result from any other form of marketing such as any purchase made by a client that the agent is already working with or conventional print advertising or show houses.

The cooling-off period creates rights for the consumer buying property while regulating closely how suppliers or estate agents operate. Estate agencies and property professionals need to be aware of the implications and prepare for changes in the way they will interact with property buyers and sellers in the future.

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

References:

Anderson, AM. Dodd, A. Roos, MC. 2012. “Everyone’s Guide to South African Law. Third Edition”. Zebra Press.

The Estate Agency Affairs Board. “Purchaser’s Cooling-Off Right: Guidelines for Estate Agents”. [online] Available at: https://www.eaab.org.za/ [Accessed 31/05/2016].

http://www.privateproperty.co.za/

THE EFFECT OF SECTION 14 OF THE CONSUMER PROTECTION ACT ON FIXED TERM RENTAL AGREEMENTS

A1_bThe Consumer Protection Act 68 of 2008 (CPA) has considerably impacted on the rental property market since its commencement on 31 March 2011. More precisely, section 14 of the CPA has had an effect on fixed term rental agreements. Section 14, however, is not relevant to fixed term lease agreements which have been entered into between juristic persons, regardless of their asset value or annual turnover. Further, section 14 will only be applicable to lease agreements which have been entered into for a fixed term – this means that section 14 will be applicable to many, if not the majority of lease agreements relating to immovable property. As the CPA only relates to  agreements, lease agreements which have been entered into on a month-to-month basis would unfortunately not fall within the ambit of this section.

The Act does not differentiate between leases for residential, commercial, retail or industrial properties; in actual fact the Act does not discuss lease agreements for immovable property as such. It is clear from the definitions and purpose of the Act, however, that it was intended for lease agreements to fall within the ambit of the Act. The nature of the transaction between the lessor and lessee calls for regulation and protection thereof; consequently sensible to assume that it was intended for the section to apply to all lease agreements irrespective of the property type.

Section 14(2)(b) of the CPA reads “despite the provisions of the consumer agreement to the contrary – the supplier may cancel the agreement 20 business days after giving written notice to the consumer of a material failure by the consumer to comply with the agreement, unless the consumer has rectified the failure within that time.”

The lessor will thus not be in a position to cancel the lease agreement during the subsistence of the lease agreement, unless the lessee is in breach of a material term of the agreement and fails to remedy such breach within the permitted period after having received written notice to that effect. This means, should the lessor wish to take occupation of the property, or sell same, he will not be permitted to cancel the agreement.

Should the lessee be in breach of a material term of the agreement, and the lessor wishes to cancel the agreement, the lessor needs to give the lessee written notice, describing such breach and allowing the lessee 20 business days to remedy same. Further, the lessor should set out in the notice that should the lessee fail to remedy the breach within the stipulated time, the consequence will be cancellation of the agreement.

The CPA has a considerable impact in fixed-term lease agreements. It is vital for property owners to be conscious of the effect of this Act so that they may comply with it and set measures in place to mitigate the potential burden placed on property owners by the Act.

Compiled by: Laura Ames

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

PROTECTING SOUTH AFRICA’S CONSUMERS

A2_BThe Consumer Protection Act, No. 68 of 2008 (CPA) was signed by the President on 24 April 2009, coming into effect on 1 April 2011.

This vital piece of legislation has and will continue to change the manner in which businesses conduct themselves in South Africa.  The Act aims to, among other things, promote a fair, accessible and sustainable marketplace for consumer products and services. The Act also, importantly, aims to establish national norms and standards to ensure the protection of consumers. Further, its objective is to prohibit unfair marketing and business practices.

The CPA applies to the following:

  1. every transaction which occurs within the Republic of South Africa;
  2. promotion or supply of any goods and services occurring within the Republic; and
  3. goods or services which are supplied or performed within the Republic in terms of transactions mentioned in the Act.

The Act is not applicable to credit agreements, defined as such in terms of the National Credit Act.

A ‘consumer’ is defined as a person/s to whom goods or services are marketed, who have entered into transactions with suppliers, users of particular goods or recipients of services.

The Bill of Rights protects the rights of all of South Africa’s citizens, including those of consumers. The CPA further outlines the fundamental rights of consumers, of which all consumers should be aware. Every consumer of goods and services is entitled to the protection of their rights, regardless of the monetary value of a transaction or the significance of the product or service that a consumer buys, even if it is only a loaf of bread. These rights include:

  1. Right to Equality in the Consumer Market and Protection Against Discriminatory Marketing Practices;
  2. Right to Privacy;
  3. Right to Choose;
  4. Right to Disclosure of Information;
  5. Right to Fair and Responsible Marketing;
  6. Right to Fair and Honest Dealing;
  7. Right to Fair, Just and Reasonable Terms and Conditions;
  8. Right to Fair Value, Good Quality and Safety; and
  9. Right to Accountability by Suppliers.

 The National Consumer Commission (NCC) was established in terms of the Consumer Protection Act. The NCC is the chief regulator of consumer-business interactions in South Africa. It was created by the government with the backing of the Department of Trade and Industry (DTI) to safeguard the economic welfare of consumers. Consumers are imperative to the growth of the economy and therefore contribute to the national fiscus and to the development of the country.

The NCC’s mere existence in terms of the Consumer Protection Act, which it administers, is to promote a fair, accessible and sustainable marketplace for consumer products and services, establish norms and standards relating to consumer protection, to provide for improved standards of consumer information, prohibit unfair marketing and business practices, promote responsible consumer behaviour, and to promote a consistent legislative and enforcement framework relating to consumer transactions and agreements. This simply means that the NCC registers and assesses complaints, investigates alleged misconduct by businesses, refers individual complaints to Alternate Dispute Resolution (ADR) agencies for resolution, and represents consumers in the Consumer Tribunal amongst other things.

It is important to remember that every Consumer has rights; any infringement of these rights is an act of non-compliance with the provisions of the Consumer Protection Act.

A consumer may approach the NCC for guidance or assistance with a dispute that cannot be amicably resolved.

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE).

CANCELLATION OF THAT GYMNASIUM CONTRACT

We have all made New Year’s Resolutions. This year I will start exercising, eating healthy and spend less time at the office and more with the family. In order to fulfil this resolution, you join the local gymnasium as soon as you return from your December holiday. It does not bother you whether the agreement is for two, three or four years. This year you are going to keep that resolution!

Then winter arrives and you spend more time at the office and at the fireside and less time in the gymnasium. By August you recognise the debit order of the gymnasium on your bank statement, knowing full well that you have not been there for at least two months.

The Consumer Protection Act (“the act”) has limited the effect of fixed-term agreements containing automatic renewal clauses for a further fixed term. As the legislator has given a wide definition to the words “goods” and “services”, most fixed-term agreements will fall within the scope of the act. Section 16 of the act provides that any consumer may cancel a long-term agreement with twenty business days’ notice, which notice must be in writing, unless both parties to the agreement are juristic persons.

The act then provides that the supplier may be entitled to a “reasonable cancellation penalty” payable by the consumer for cancelling the fixed-term agreement. What constitutes a reasonable cancellation penalty will depend on the type and nature of the contract.

Lester Timothy of Deneys Reitz Attorneys uses the example of a mobile phone contract, an analogy most of us will understand. A consumer enters into a two-year contract with a mobile phone service provider and simultaneously purchases a handset to be paid by monthly instalments in the course of the two-year contract. The service provider will thus have incurred expenses regarding the handset. Therefore, in the event of the consumer cancelling the contract, it will be acceptable for the mobile service provider to charge the consumer for the outstanding balance of the handset to recover the expenses incurred.

Where a supplier incurs no significant additional cost as a result of the cancellation of the contract, the supplier will have more difficulty to establish the reasonableness of any cancellation penalty unless a discount is given.

You may therefore approach that gymnasium and notify them in writing of your intention to cancel the agreement after twenty business days. Depending on the remaining period of your contract and the wording of the agreement, you will have to pay a reasonable cancellation penalty. However, as the gymnasium did not incur significant additional costs as a result of your cancellation, you will be entitled to a discount on the remaining balance of the agreement.

Negotiate the cancellation penalty fee with the gymnasium. You may be surprised what the offer of an immediate payment as cancellation penalty can do.

And next year, rather buy running shoes, even expensive ones. They will wait patiently in your wardrobe till the following New Year’s Day …

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice.

THE CONSUMER’S RIGHTS UNDER THE CONSUMER PROTECTION ACT

Can a consumer take you, the service provider, to court because they did not understand some of the terms and conditions of your signed contract? Beware, the answer is Yes!

From April 2011 the Consumer Protection Act came into full effect with the result that it is now against the law to use difficult-to-understand language in any business document or contract.

Business usually comes with some kind of paperwork, whether it’s a contract, a letter of agreement or even an instruction booklet. These vital documents are often written in language that is hard to understand for the average consumer, which is why there are specific Plain Language regulations in The Consumer Protection Act to prevent consumers signing documents they do not understand.

Protecting the consumer

The Act’s express purpose is to make sure consumers are not treated unfairly – intentionally or not. This means that using plain language is more crucial than ever. From now on, using obscure and confusing wording, especially in binding contracts, is not allowed. Quite simply, it’s illegal!

Too many consumers have landed in big trouble, especially financial trouble, because they haven’t understood what they’ve signed. Sometimes contracts are written in bloated, bureaucratic jargon just because that’s the way it has always been, or because the people writing the contracts don’t know any other way to do it. Often, though, unscrupulous businesses have used complicated language on purpose, as a way to trick consumers into paying for something they can’t afford, to sign away their rights, or to agree to unfair terms and conditions.

Defining plain language

The Consumer Protection Act defines plain language in Part D, Section 22 as follows:

“For the purposes of this Act, a notice, document or visual representation is in plain language if it is reasonable to conclude that an ordinary consumer of the class of persons for whom the notice, document or visual representation is intended, with average literacy skills and minimal experience as a consumer of the relevant goods or services, could be expected to understand the content, significance, and import of the document without undue effort, having regard to:

  1. The context, comprehensiveness and consistency of the notice, document or visual representation;
  2. The organisation, form and style of the notice, document or visual representation;
  3. The vocabulary, usage and sentence structure of the notice, document or visual representation; and
  4. The use of any illustrations, examples, headings, or other aids to reading and understanding.”

This means that one won’t be permitted to word things so widely that they can be understood in several ways. The Act states that if there is any doubt about the meaning of certain words or terms and conditions, the benefit will go to the consumer.

Even advertising and marketing may no longer contain any ambiguity. Advertisements won’t be allowed to exaggerate and they will have to be easy to understand, fair and honest. The Act states that service providers will have to spell out everything in words that consumers can understand, alternatively the consumers have the right to full disclosure and information in plain and understandable language.

So, don’t delay. If you have a business document or contract that has been used for generations you might have to take a second look at it to edit or reword it so that it complies with the Consumer Protection Act.

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice.

THE INTERPLAY BETWEEN THE CONSUMER PROTECTION ACT AND THE NATIONAL CREDIT ACT, AND THE POSSIBILITY OF PENALTIES WITH EARLY SETTLEMENT OF CREDIT AGREEMENTS

A4_BMr Black buys a BMW car in terms of a hire purchase agreement and the financing is done through BMW Finance. After a few months Mr Black inherits a huge sum of money and decides that he wants to settle the outstanding amount. Mr Black’s concern is whether the credit provider is entitled to charge a penalty fee for early settlement of the outstanding finance amount.

The first step in answering the abovementioned question will be to determine which laws regulate the situation. The legislation that applies here will be the National Credit Act 34 of 2005 and the Consumer Protection Act 68 of 2008.

In the above scenario a distinction should be drawn between the scope of each of these Acts, as the one pertains to the credit agreement itself and the other to the goods, being the BMW car. Section 5 of the Consumer Protection Act lists the situations in which this Act will apply. Section 5(2)(d) is of particular interest to Mr Black as it excludes credit agreements which are regulated by the National Credit Act. However, the goods or services provided in terms of the credit agreement are included and will be regulated by the Consumer Protection Act, whereas credit agreements as contemplated in the National Credit Act, specifically section 8(4)(c), includes hire purchase agreements (instalment agreements) in the ambit of the National Credit Act.

Mr Black’s situation illustrates the position as stated in Article 5(2)(d) of the Consumer Protection Act. The implication of this section is that all credit agreements that are subject to the National Credit Act will be governed by the National Credit Act, but the goods and services in terms of the agreement will fall within the scope of the Consumer Protection Act. It is here that the above acts overlap with each other. The overlap actually lies in that both acts can apply to one agreement. The credit agreement must comply with the National Credit Act, but the goods and services must comply with the Consumer Protection Act. If there is a defect in the quality of the goods or the service the Consumer Protection Act will provide the appropriate remedy, but if it is about the credit agreement itself, then the National Credit Act will apply.

Section 2(9) of the Consumer Protection Act deals with the interpretation of the Act and more specifically on how the law has to be interpreted in cases where there are discrepancies between the Consumer Protection Act and any other law. The Consumer Protection Act should be read in harmony with other legislation as far as possible, but if it is not possible, then the law that offers the most protection to the consumer shall apply.

The two sections in the National Credit Act which deals with the early settlement of credit agreements are sections 122 and 125 of the Act. According to section 122 of the National Credit Act, a consumer may terminate the credit agreement at any time. The consumer can do this by paying the settlement amount as calculated in accordance with section 125 of the National Credit Act.

Section 125 states that a consumer is entitled to cancel a credit agreement at any time with or without prior notice to the credit provider. The settlement amount will be the sum of the following amounts:

  • The outstanding balance of the principal debt / capital amount.
  • All rates and charges up to and including the settlement date. For example, if the outstanding amount can be settled after 3 months, then 3 months’ interest would be charged. The interest will be calculated on the principal amount borrowed.

In the case of a large credit agreement (R250 000.00 or more) the outstanding amount will be calculated as above, but with additional interest, known as an early settlement fee. The fee may not exceed an amount equal to three months’ interest on the capital amount. 

Conclusion:

Therefore, if the BMW that Mr Black bought was worth more than R250 000.00 the credit provider will be entitled to charge a penalty fee of not more than 3 months’ interest on the capital amount. In the event that the purchased item’s worth is less than R250 000.00 the credit provider will not be entitled to charge a penalty fee.

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice.

THE CONSUMER’S RIGHTS UNDER THE CONSUMER PROTECTION ACT

A3_BCan a consumer take you, the service provider, to court because they did not understand some of the terms and conditions of your signed contract? Beware, the answer is Yes!

From April 2011 the Consumer Protection Act came into full effect with the result that it is now against the law to use difficult-to-understand language in any business document or contract.

Business usually comes with some kind of paperwork, whether it’s a contract, a letter of agreement or even an instruction booklet. These vital documents are often written in language that is hard to understand for the average consumer, which is why there are specific Plain Language regulations in The Consumer Protection Act to prevent consumers signing documents they do not understand.

Protecting the consumer

The Act’s express purpose is to make sure consumers are not treated unfairly – intentionally or not. This means that using plain language is more crucial than ever. From now on, using obscure and confusing wording, especially in binding contracts, is not allowed. Quite simply, it’s illegal!

Too many consumers have landed in big trouble, especially financial trouble, because they haven’t understood what they’ve signed. Sometimes contracts are written in bloated, bureaucratic jargon just because that’s the way it has always been, or because the people writing the contracts don’t know any other way to do it. Often, though, unscrupulous businesses have used complicated language on purpose, as a way to trick consumers into paying for something they can’t afford, to sign away their rights, or to agree to unfair terms and conditions.

Defining plain language

The Consumer Protection Act defines plain language in Part D, Section 22 as follows:

“For the purposes of this Act, a notice, document or visual representation is in plain language if it is reasonable to conclude that an ordinary consumer of the class of persons for whom the notice, document or visual representation is intended, with average literacy skills and minimal experience as a consumer of the relevant goods or services, could be expected to understand the content, significance, and import of the document without undue effort, having regard to:

  1. The context, comprehensiveness and consistency of the notice, document or visual representation;
  2. The organisation, form and style of the notice, document or visual representation;
  3. The vocabulary, usage and sentence structure of the notice, document or visual representation; and
  4. The use of any illustrations, examples, headings, or other aids to reading and understanding.”

This means that one won’t be permitted to word things so widely that they can be understood in several ways. The Act states that if there is any doubt about the meaning of certain words or terms and conditions, the benefit will go to the consumer.

Even advertising and marketing may no longer contain any ambiguity. Advertisements won’t be allowed to exaggerate and they will have to be easy to understand, fair and honest. The Act states that service providers will have to spell out everything in words that consumers can understand, alternatively the consumers have the right to full disclosure and information in plain and understandable language.

So, don’t delay. If you have a business document or contract that has been used for generations you might have to take a second look at it to edit or reword it so that it complies with the Consumer Protection Act.

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice.

THE INTERPLAY BETWEEN THE CONSUMER PROTECTION ACT AND THE NATIONAL CREDIT ACT, AND THE POSSIBILITY OF PENALTIES WITH EARLY SETTLEMENT OF CREDIT AGREEMENTS

A4Mr Black buys a BMW car in terms of a hire purchase agreement and the financing is done through BMW Finance. After a few months Mr Black inherits a huge sum of money and decides that he wants to settle the outstanding amount. Mr Black’s concern is whether the credit provider is entitled to charge a penalty fee for early settlement of the outstanding finance amount.

The first step in answering the abovementioned question will be to determine which laws regulate the situation. The legislation that applies here will be the National Credit Act 34 of 2005 and the Consumer Protection Act 68 of 2008.

In the above scenario a distinction should be drawn between the scope of each of these Acts, as the one pertains to the credit agreement itself and the other to the goods, being the BMW car. Section 5 of the Consumer Protection Act lists the situations in which this Act will apply. Section 5(2)(d) is of particular interest to Mr Black as it excludes credit agreements which are regulated by the National Credit Act. However, the goods or services provided in terms of the credit agreement are included and will be regulated by the Consumer Protection Act, whereas credit agreements as contemplated in the National Credit Act, specifically section 8(4)(c), includes hire purchase agreements (instalment agreements) in the ambit of the National Credit Act.

Mr Black’s situation illustrates the position as stated in Article 5(2)(d) of the Consumer Protection Act. The implication of this section is that all credit agreements that are subject to the National Credit Act will be governed by the National Credit Act, but the goods and services in terms of the agreement will fall within the scope of the Consumer Protection Act. It is here that the above acts overlap with each other. The overlap actually lies in that both acts can apply to one agreement. The credit agreement must comply with the National Credit Act, but the goods and services must comply with the Consumer Protection Act. If there is a defect in the quality of the goods or the service the Consumer Protection Act will provide the appropriate remedy, but if it is about the credit agreement itself, then the National Credit Act will apply.

Section 2(9) of the Consumer Protection Act deals with the interpretation of the Act and more specifically on how the law has to be interpreted in cases where there are discrepancies between the Consumer Protection Act and any other law. The Consumer Protection Act should be read in harmony with other legislation as far as possible, but if it is not possible, then the law that offers the most protection to the consumer shall apply.

The two sections in the National Credit Act which deals with the early settlement of credit agreements are sections 122 and 125 of the Act. According to section 122 of the National Credit Act, a consumer may terminate the credit agreement at any time. The consumer can do this by paying the settlement amount as calculated in accordance with section 125 of the National Credit Act.

Section 125 states that a consumer is entitled to cancel a credit agreement at any time with or without prior notice to the credit provider. The settlement amount will be the sum of the following amounts:

  • The outstanding balance of the principal debt / capital amount.
  • All rates and charges up to and including the settlement date. For example, if the outstanding amount can be settled after 3 months, then 3 months’ interest would be charged. The interest will be calculated on the principal amount borrowed.

In the case of a large credit agreement (R250 000.00 or more) the outstanding amount will be calculated as above, but with additional interest, known as an early settlement fee. The fee may not exceed an amount equal to three months’ interest on the capital amount.

Conclusion:
Therefore, if the BMW that Mr Black bought was worth more than R250 000.00 the credit provider will be entitled to charge a penalty fee of not more than 3 months’ interest on the capital amount. In the event that the purchased item’s worth is less than R250 000.00 the credit provider will not be entitled to charge a penalty fee.

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice.