ESSENTIAL ASPECTS FOR BUSINESS OF THE CONSUMER PROTECTION ACT

1. WHO IS AFFECTED BY THE CONSUMER PROTECTION ACT (“CPA”)?
• • • • Suppliers of products Suppliers of services Dual suppliers of services and products Consumers

4. DISADVANTAGES OF THE CPA
• Commercial uncertainty: e.g. the fact that consumers can terminate longterm contracts will make projections and budgeting dif cult for certain industries. Contractual uncertainty: e.g. suppliers will not always be sure whether they have contractual certainty since the court or tribunal may now strike out any contract term which they deem to be unfair on the consumer. Uncertainty surrounding the practical application of certain provisions of the Act. Open to abuse by consumers: consumers may lay frivolous complaints; or a consumer who owes a supplier money may allege that the supplier is in contravention of the Act, simply to delay or avoid paying.

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2. WHEN IS THE CPA APPLICABLE?
It is applicable to every transaction (as de ned in the Act) occurring in RSA also, to the promotion of any goods or services within RSA • •

The Transaction must be in the ordinary course of the business of the Supplier

The Supplier must be Transacting with a Consumer (Consumers are: small business and individuals)

5. ADVANTAGES OF THE CPA
• • • Creates awareness and a culture of consumer rights protection Contractual inequality is redressed; David can take on Goliath Easy (cheap) access to justice

3. WHAT DOES PRODUCT LIABILITY MEAN UNDER THE CPA?
Section 61: Liability for damage caused by goods The supply chain is jointly and severally liable for any harm, death, injury, illness, loss, physical damage, economic loss caused wholly or partly by : • Supplying unsafe goods • Product failure, defects, hazard in goods • Inadequate instructions, warnings about the product The supplier is liable regardless of whether there was any negligence present on behalf of the supplier. This is the major change which the Act has brought in, strict liability.

Note: a consumer may lay a complaint with the Commission who will investigate the complaint. In the event of a legitimate complaint, the matter will be referred to the Tribunal for prosecution. In the event that a supplier (business) is found guilty of being in violation of a provision of the Act, the Tribunal may level an administrative ne of R1000 000 or 10% of annual turn-over, whichever is the greater. This can have a crippling effect on most businesses.

6. FRAMEWORK OF THE CPA: DEFINITIONS
Note: Ensure that you are familiar with the follow essential de nitions from the Act.
GOODS:

7. SUMMARY OF ESSENTIAL DEFINITIONS
THE KEY TO THE CPA

Goods and Services

Anything for human consumption, any tangible object, any literature, music, photograph, game, information, data, software, other tangible product written on any medium, a legal interest in land, gas, water and electricity.
SERVICES:

Promoted or transacted in the ordinary course of the supplier’s business

To the Consumer

8. VOETSTOOTS CLAUSE
• • • A sells his (only) primary residence to B: voetstoots is still applicable A sells his (only) beach house to B: voetstoots is still applicable A sells his primary residence to B: but the seller used the services of a real estate agent who was the effective cause of the deal: The Act is applicable to the mandate that the estate agent takes from the seller. The Act is accordingly applicable to all of the services provided by the agent to the parties. While it is currently a huge point of discussion and controversy, the agent’s involvement should not elevate the agreement between the seller and the purchaser (which is not an ordinary course transaction) to a transaction to which the Act is applicable. The voetstoots clause should therefore still be allowed in these agreements. A sells one of his units in his developments to B: the Act is applicable to these transactions because this is an ordinary course transaction. The supply chain is also jointly and severally liable for the product (the unit). The agent would be included in the supply chain.

Any work or undertaking, provision of education or information, advice or consultation, any banking services or nancial services, transportation of individual or goods, provision of accommodation, entertainment or access to entertainment, access to any electronic communication infrastructure, access to any event, premises, activity or facility, access to premises in terms of rental and right of occupation.
TRANSACTION:

An agreement for the supply (or potential supply) of any goods of services in the suppliers ordinary course of business. Note: the Act is only applicable to transactions between a supplier and a consumer in the ordinary course of the supplier’s business.
CONSUMER:

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A person (including small companies) to whom goods or services are marketed or who has entered into a transaction with a supplier in the suppliers ordinary course of business A user of the goods or recipient or bene ciary of the services irrespective of whether the user is a party to the transaction A franchisee

Note: the voetstoots clause (a product of common law) will still be in use and applicable to transactions which are not ordinary course transactions.

9. IMPORTANT PROVISIONS
Section14: Expiry and renewal of xed-term agreements A consumer may terminate a long-term contract on 20 business days notice. (Section 14 is however not applicable to companies or CCs regardless of turn-over). The supplier in only entitled to a reasonable cancellation fee in such an event. In the current draft Regulations the cancellation fee is currently set as a maximum of 10% of the value of the remainder of the contract.

Note: Government and large businesses are not Consumers. The Regulations for the Act (which are still to be promulgated) will provide the threshold for the annual turn-over (and asset base) for companies, above which, companies will deemed not to be consumers.

Section16: Right to cooling-off period after direct marketing A consumer is entitled to cancel an agreement which resulted from direct marketing, without reason or penalty. The cool-off period is 5 business days from the time of the transaction. The supplier must refund the consumer within 15 days from return of the goods or notice of termination. Section19: Consumer’s rights regarding delivery of goods or supply of services It is an implied (silent) term of every transaction for the supply of goods and services that: • The supplier is responsible to deliver the goods or services on the agreed place, time and date; at the cost of the supplier. • If the supplier tenders delivery of the goods or services on a date or time other than that agreed to, the consumer may: • • • Accept the delivery as tendered; or Insist that delivery occur on the agreed date (if delivery has not yet occurred); or Cancel the agreement without penalty, treating the delivered goods as unsolicited goods/services to section 21.

Section 21: Unsolicited goods or services Goods or services are unsolicited if: • the goods were left with the consumer after direct marketing; • the goods delivered are materially different to what was ordered; • delivery was rejected as a result of delivery on incorrect date, time or location; • the supplier delivered a larger quantity of goods than what was order; the excess is unsolicited. Note: a rm which delivers goods as part of its business must be fully acquainted with the implications of the entire section 21; this is only the highlights of the section. It is important to know that the consumer becomes the owner of unsolicited goods. Section 22: Plain language Any document, notice or contract must be in plain language: • So that an ordinary consumer with average literacy skills and minimal experience as a consumer of the relevant goods or services could be expected to understand the content. Section 30: Bait Marketing A supplier may not mislead the consumer in any advertisement about the availability of goods or services at a speci c price when the supplier is unable or does not intend to supply the goods or services at those prices. Section 31: Negative option marketing A supplier may not promote any goods or services on the basis that an agreement will automatically come into existence, unless the consumer (actively) declines the offer. Section 41: False, misleading or deceptive representations The supplier of goods or services may not, directly or indirectly, express or imply a false, misleading or deceptive representation concerning a material fact, or use exaggerated, innuendo or ambiguity as to a material fact, or fail to correct an apparent misapprehension on the part of the consumer.

• If the supplier delivers a quantity larger than what was agreed, the consumer may: • • Reject all the goods; or Accept the delivery and treat the excess quantity of goods as unsolicited goods to section 21.

Note: the implications of late delivery of goods and services are harsh. Suppliers should be careful when they commit to a time and date for delivery. Section 20: Consumers right to return goods The consumer may return goods for a full refund if: • the goods were returned as a result of termination during the cool- off period; • the consumer was not given an opportunity to examine the goods prior to delivery; • the supplier sent a mixture of goods (not only what was ordered); • the goods were ordered for a particular purpose and the consumer found that (within 10 business days) the goods were not suitable for the intended purpose.

Section 47: Over-selling and over booking If the supplier accepts a reservation but fails to deliver because of insuf cient stock or capacity, the supplier must: • Refund the consumer with interest; • Compensate the consumer for costs directly incidental to the supplier’s breach. Section 48: Unfair, unreasonable or unjust contract terms A supplier may no longer insert contract terms which are excessively one-sided, which require the consumer to waive his/her rights or which force the consumer to assume certain obligations or indemnify the supplier. It is important to revise contracts to bring them in line with the Act. The ‘old’ terms may be deemed to be a contravention of the Act. Note: see regulation 33 of the Regulations to the Act, which is downloadable from the BCA website, contains a list of ‘unjust’ contract terms. Section 54: Consumer’s right to demand quality service The consumer has the right to the timely performance and completion of services, and the timely notice of any unavoidable delays; the performance of the service is to be in a manner and quality that persons are generally entitled to expect. Section 55: Consumer’s rights to safe, good quality goods “goods must be reasonably suitable for the purpose for which they are generally intended’’ “it is irrelevant whether product failure or defect is latent or patent or whether it could have been detected by the consumer” Section 61: Liability for damage caused by goods “the supply chain is jointly and severally liable for any harm caused wholly or partly as a consequence of supplying unsafe goods, product failure, a defect or hazard, or from harm arising from inadequate instructions or warnings pertaining to any hazard arising from or associated with the use of the goods, irrespective of the presence of negligence on behalf of the supply chain”

10. HOW DOES BUSINESS ADJUST?
ADJUST / CHANGE YOUR CONTRACTS

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Consumers and non-consumers: consider having two sets of contracts, one for the consumer and one for non-consumers. Plain language: the contract for the consumers must use plain language, while current contracts may continue to be used for non-consumers. Fair/reasonable should be the benchmark for consumer contracts Notice for certain terms (e.g. Limiting risk/ liability of the supplier, indemnities) Dispute resolution provision Reduce to writing

TRAIN YOUR STAFF

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Staff may be the possible cause for liability or infringements of the Act Create a new culture of awareness amongst staff Improve on and monitor turn around times Report back to clients Response to complaints No false representation Complacence or tardiness in staff (disciplinary measures)

DELIVER QUALITY GOODS / SERVICES

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Review processes (manufacturing / distribution / service delivery) Quality control

LIABILITY INSURANCE

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Consider product liability insurance / professional indemnity Severe penalties for non-compliance

It is important to note that these notes are highlights of the Act as presented in the seminar; the notes are not intended to be a substitution for reading the Act and/or taking legal advice on any topic in the Act.

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