protection The Consumer Protection Act contains a general prohibition against unfair and unlawful terms and conditions in agreements with consumers.

Transcription

1 the consumer protection act CONTRACT TERMS UNDER THE CONSUMER PROTECTION ACT Applicable sections of the Consumer Protection Act, 68 of 2008: S 48, 49, 50, 51, 52 Applicable sections of the Consumer Protection Act Regulations: R 44 The Consumer Protection Act contains a general prohibition against unfair and unlawful terms and conditions in agreements with consumers. The CPA deals with this issue in the following way: 1. There is a black list of contract terms that will always be unlawful and invalid under the Act. 2. There is a grey list of contract terms that could be regarded as unfair, unjust and unreasonable. The grey list is further subdivided into a fixed list of terms (contained in the regulations) that are presumed to be unfair unless the supplier proves otherwise, and other terms not on the list that may still generally be regarded as being unfair, unjust or unreasonable by the Tribunal or a court. Prohibited terms or conditions The following terms and conditions will always be unlawful under the CPA: 1. Any term or condition that has as its general purpose or effect to defeat the purposes and policy of the Act. 2. Any term or condition aimed at misleading or deceiving the consumer. 3. Any term or condition which subjects the consumer to fraudulent conduct. 4. Any term or condition that forces a consumer to directly or indirectly waive or deprive themselves of a right in terms of the Act; or allows the supplier to avoid an obligation or duty they have under the Act. 5. A limitation of liability for loss resulting from the gross negligence of supplier or any person acting for, or controlled by them. 6. Any acknowledgement by the consumer that no representations or warranties were made to him in connection with the agreement by or on behalf of the supplier when this is false. 7. Any acknowledgement by the consumer that he has received goods, services or a document under the Act when he has not, in fact, received such goods, services or documents. 8. A forfeiture of benefits if the consumer exercises any right he may have under the Act. 9. A term whereby the consumer authorises any person acting on behalf of the supplier to enter any premises for the purposes of taking possession of any goods to which the agreement relates.

2 10. An undertaking by the consumer to sign in advance any documentation relating to the enforcement of the agreement (e.g. consent to judgment). 11. Consent by the consumer to a predetermined value of costs relating to the enforcement of the agreement, except to the extent that is consistent with the Act. 12. An agreement by the consumer to hand over their identity document, credit or debit card, bank account or automatic teller machine access card, or any similar identifying document or device to the supplier to be used to access the consumer s bank account. Unfair and unreasonable contract terms Terms which are presumed to be unfair and/or unreasonable Regulation 44 of the regulations released by the Minister of Trade and Industry lists a number of provisions in consumer contracts which will be presumed to not to be fair and reasonable. The presumption is a rebuttable one, so the onus will be on the supplier to prove that the relevant term was fair and reasonable in the circumstances. If the consumer entered into the agreement for business purposes, the presumption will not apply, unless the consumer was not given the opportunity to negotiate with the supplier to remove or amend the term, or he was given the opportunity to do so but the supplier failed to remove or amend the term in question. The following terms will be presumed to be unfair: 1. Exclusions or limitations of the supplier s liability for death or personal injury. 2. Exclusions or restrictions of the consumer s normal legal rights or remedies against the supplier for breach of contract, including the right of the consumer to set-off any claim he may have against the supplier against a debt owed to the supplier. I.e. The phrase without deduction or set-off will no longer be permitted in agreements with consumers. 3. Terms that introduce additional conditions before a supplier will be responsible for commitments made to a consumer by his duly authorised agent. 4. Exclusions or limitations of the consumer s right to take legal action or exercise any other legal remedy against the supplier. (The regulation has not been clearly drafted but this may include compulsory arbitration clauses where the arbitration is not covered by the Act.) 5. Reversals of the onus of proof or terms that restrict the evidence that would normally be available to a consumer. (It is not yet clear whether clauses permitting the presentation of certificates of indebtedness as prima facie proof will still be valid.) 6. Sole discretion clauses which leave it to the discretion of the supplier to determine whether the goods or services supplied are in conformity with the agreement; or which give the supplier the exclusive right to interpret any provision of the agreement. 7. One-sided forfeiture or acceleration of benefit clauses, where the consumer is not given the same type of rights if the supplier fails to conclude or perform the agreement. 8. Penalty clauses or liquidated damage clauses that allow the supplier to claim damages from the consumer which significantly exceed the harm suffered by him. 9. One-sided clauses that allow the supplier to terminate the agreement at will, without the consumer having the same right.

3 10. Termination clauses which allow a supplier to terminate an open-ended agreement without reasonable notice being given to the consumer: except where the consumer has committed a serious breach of the agreement. 11. Exclusion or limitation of the consumer s right to terminate the agreement when the supplier makes unilateral price increases. 12. Compulsory performance clauses which force the consumer to fulfil all his obligations where the supplier has failed to fulfil his own. 13. Assignment or delegation clauses which allow the supplier to assign or delegate his obligations under the agreement to the detriment of the consumer, without the consumer s agreement. 14. Restrictions to the consumer s right to transfer a guarantee provided by the supplier when reselling goods. 15. Terms which allow the supplier to unilaterally change the terms of the agreement, including the characteristics of the product or service. 16. Terms which allow the supplier to amend an existing manual agreement by posting different terms and conditions online which have not been agreed by the consumer. 17. Force majeure or other clauses which permit, or having the effect of permitting, the supplier, but not the consumer, to avoid or limit their performance under the agreement. 18. One-sided renewal clauses which give the supplier the right to renew the agreement but not the consumer. 19. Exclusion of the supplier s vicarious liability for the acts or omissions of its agents. 20. Terms which allow the supplier to charge the consumer unreasonably high fees or charges for the use of a thing or right after the agreement has been cancelled. 21. Payment terms which demand unreasonably high deposits or excessive upfront payments to be paid by the consumer, without good reason. 22. Exclusion or restriction of the consumer s right to rely on the statutory defence of prescription. 23. Imposing a shorter limitation period than the common law or other laws for taking legal steps against the supplier (including for the making of a written demand and the institution of legal proceedings). 24. Unfair distribution or allocation of risk to the detriment of the consumer. 25. Allowing the supplier an unreasonably long time to perform under the agreement. 26. Forcing the consumer to indemnify the supplier against liability incurred by it to third parties. 27. Deeming provisions which state that the consumer has acknowledged a certain state of affairs to be present or true (to his detriment), unless the consumer has been given a suitable period of time to make an express declaration about such matters and he has been warned by the supplier of the meaning that will be attached to his conduct if he fails to do so. 28. Deeming provisions that a statement has been received by the consumer, unless the statement has been sent by prepaid registered post to the chosen address of the consumer.

4 29. One-sided cost clauses which only allow the supplier and not the consumer to claim legal costs on a higher scale. 30. Excluding the law of South Africa as the law applicable to an agreement concluded in South Africa with a consumer who was residing in South Africa when the agreement was concluded. Terms that may generally be regarded as unfair and/or unreasonable Even where a term is not automatically presumed to be unfair and/or unreasonable, it may still be regarded as such by the general provisions of the Act. Section 48 states that a transaction or agreement, a term or condition of a transaction or agreement, or a notice to which a term or condition is purportedly subject, is unfair, unreasonable or unjust if: 1. It is excessively one-sided in the supplier s favour. 2. It is so adverse to the consumer as to be inequitable. 3. The consumer, relying on a false, misleading or deceptive representation or a statement of opinion made by or on behalf of the supplier, acted to his detriment by agreeing to the term or the agreement. 4. The fact, nature and effect of a certain type of term, condition or notice was not drawn to the attention of the consumer in the manner required by section 49 of the Act. In deciding whether any agreement or term of that agreement is unfair or unjust or unlawful, the Tribunal or a court will take the following factors into account: (a) the fair value of the goods or services in question; (b) the nature of the parties to that transaction or agreement, their relationship to each other and their relative capacity, education, experience, sophistication and bargaining position; (c) those circumstances of the transaction or agreement that existed or were reasonably foreseeable at the time that the conduct or transaction occurred or agreement was made, irrespective of whether this Act was in force at that time; (d) the conduct of the supplier and the consumer, respectively; (e) whether there was any negotiation between the supplier and the consumer, and if so, the extent of that negotiation; (f) whether, as a result of conduct engaged in by the supplier, the consumer was required to do anything that was not reasonably necessary for the legitimate interests of the supplier; (g) the extent to which any documents relating to the transaction or agreement were drafted in plain language; (h) whether the consumer knew or ought reasonably to have known of the existence and extent of any particular provision of the agreement that is alleged to have been unfair, unreasonable or unjust, having regard to any trade custom and any previous dealings between the parties; (i) the amount for which, and circumstances under which, the consumer could have acquired identical or equivalent goods or services from a different supplier; and

5 (j) in the case of supply of goods, whether the goods were manufactured, processed or adapted to the special order of the consumer. Notice required for certain terms and conditions The following terms may be regarded as unfair and/or unreasonable if the fact, nature and effect of the term have not been drawn to the attention of the consumer in a conspicuous manner and form that is likely to attract the attention of an ordinarily alert consumer, having regard to the circumstances: (a) a limitation of risk or liability for the supplier; (b) an assumption of risk or liability by the consumer; (c) indemnities in favour of the supplier; (d) acknowledgements of any fact by the consumer. Other provisions of the Act which may affect drafting of agreements 1. A consumer must be given 20 business days notice to remedy a breach of the agreement before the supplier is entitled to cancel the agreement. 2. If contracting with juristic persons, obtain a warranted disclosure of their annual turnover. 3. The quality of a service provided to a consumer is determined with reference to any specific criteria or conditions agreed to between the parties before or during the performance of the services. 4. It is therefore important to ensure that any service agreement properly records any such criteria or conditions that have been agreed to OR contains a declaration or acknowledgment by the consumer that no such criteria or conditions apply. 5. To avoid the implied warranty of quality that will be applied to goods sold under the Act, it is important that the agreement clearly and expressly states the condition in which the goods are sold to the consumer and the consumer has expressly agreed to the goods being sold in that condition. 6. It is important to also include an acknowledgement from the consumer that he has not specifically informed the supplier of any particular purpose for which he wishes to acquire or use any goods. 7. If a particular purpose has been identified by the consumer for the goods and communicated to the supplier, this must be clearly recorded in the agreement. In this event, the supplier may want to include a disclaimer that they are not knowledgeable in the use of the goods for that particular purpose and cannot warrant that they are suitable for that purpose. Source: The above article appears at and has been slightly adapted. Rynardt Olivier Rynardt Olivier can be contacted at rynardt@edutrain.co.za For information on other Consumer Protection Act related topics, go to The views and opinions expressed above do not represent qualified legal opinion, but is merely a personal view based on my understanding and interpretation of the Consumer Protection Act.