Consumer Protection Act: How It Affects You
It’s time to focus on how this Act influences the property market
The Consumer Protection Act (CPA): what exactly is it, and why should we concern ourselves with it? Well, we consume, or come into contact with products countless times every single day.
The Act, which was gazetted on April 29 2009 (the Minister is due to publish regulations at the end of April 2010) is a “Bill of Rights” for you, the Consumer, to help shield you from products that are unsafe, making the South African Consumer the most protected in the world.
The Act is going to have a huge impact on virtually every business and every transaction in South Africa. The intention of the legislature was to put in place a set of fundamental Consumer rights, the regulation of business names and industry codes of conduct.
The Act applies to:
- Every transaction for the supply of goods and services occurring within South Africa, unless specifically exempt;
- The promotion of goods and services within South Africa; and
- The goods and services themselves after the transaction is complete.
The Act is going to have a huge impact on virtually every business and every transaction in South Africa
The application of the Act is excluded if the Consumer is the State, if the Consumer is a juristic person with a turnover or asset value above a threshold to be determined by the Minister, credit agreements under the National Credit Act (but not excluding the goods and services under that agreement) and if the Minister has granted the industry an exemption from the provisions of the Act. The definition of “goods” includes a legal interest in land or any other immovable property and “supply” includes the granting of access to any premises.
The “Consumer Rights” include right of equality in the Consumer market; Consumer’s rights of privacy, Consumer’s right to choose, right to disclosure and information, right to fair and reasonable marketing, right to fair and honest dealing, right to fair, just and reasonable terms and conditions and right to fair value, good quality and safety.
The key provisions focusing on the property industry:
- Agreements need to be in a plain and understandable language and the terms cannot be unfair, unreasonable or unjust, failing which those terms shall not be enforceable.
- Fixed term agreements may not exceed prescribed time periods and may be cancelled at any time by the Consumer on twenty business days’ notice. A Supplier’s recourse is to impose a reasonable cancellation penalty, if any. It is unclear whether this will be interpreted to pertain to existing law and damages. Consumers may terminate transactions resulting from direct marketing, without reason or penalty within five days.
- If a Consumer is unable to examine goods, the goods delivered must be as described. If not, the Consumer may return the goods to the Supplier at the Supplier’s cost and risk. This may impact off-plan developments.
- All goods displayed for sale must be priced. If the goods are displayed with more than one price, they must be sold at the lower price.
- Anybody involved in direct marketing at the premises of the Supplier must wear or display a badge or identification or provide identification on request.
This may certainly change the manner in which Estate Agents market properties…
The Act sets general standards for marketing of goods and services. One cannot imply false or misleading representations. A Supplier must not express or imply a false, misleading or deceptive representation concerning a material fact to a Consumer, nor fail to correct an apparent misapprehension on the part of the Consumer.
This may certainly change the manner in which Estate Agents market properties and may also mean the end of the parameter pricing and marketing. In particular the Act states that a Supplier cannot make any false, misleading or perceptive representations that any land or immovable property:
- Has characteristics which it does not have;
- May lawfully be used for purposes that are unlawful or impracticable; or
- Any facilities or amenities which it does not have or are not available.
Dealing with the restriction on unfair, unjust or unreasonable terms, the Act stipulates that
- A Supplier cannot require a Consumer to waive his rights, assume obligations or waive liability of a Supplier on terms that are unfair, unreasonable or unjust.
- Price and terms must be fair.
This is controversial in that it is not known whether the Government intends to utilise this Act as a price control mechanism.
There are restrictions applicable to auctions and the disclosure of reserve price or bidding by owner or auctioneer.
There is further an alteration to the traditional “voetstoots” clause. In terms of the Act every Consumer has a right to receive goods that are suitable for the purpose for which they are bought and free of defects. The exception to the aforesaid is if a Consumer has been expressly informed that the goods were offered in a specific condition and has accepted goods in that condition. This particular section does not apply to auctions.
The Act is extensive in its application. Other key provisions include:
- An implied warranty of quality which allows the Consumer within six months after delivery, to return goods to the Supplier if the goods are faulty or unsafe. The Supplier, at its option, must repair, replace or exchange the goods. A refund must be the price paid for the goods. If the Supplier elects on repairing the item, there is a further three month warranty. If there is again a fault, the Supplier subsequently can only elect to either replace or refund the Consumer. There is also an implied warranty on all repaired goods in respect of all parts installed during any repairs for a period of three months.
- An introduction of strict liability on the Manufacturer, Importer, Distributor, Supplier or Retailer for any harm caused as a result of the supply of unsafe goods, product failure or defect and/or inadequate instruction. The liability is joint and several. The harm for which a Consumer can claim includes death, injury, illness, loss or damage to property, including economic loss. A Consumer will have a right to restrict unwanted direct marketing and can refuse to be contacted for purposes of direct marketing. The Minister may also regulate the time for contacting Consumers. There are severe restrictions on bait marketing and negative option marketing.
- The Act further regulates catalogue selling and referral selling.
- A Supplier will also be restricted from overselling or overbooking.
- The Act restricts the use of a trade name and businesses will be required to trade under the officially registered name or a business name.
- In respect of the enforcement of the Act, the National Consumer Commission will be set up. A Consumer will have the option, depending on the circumstances, of approaching either a Tribunal, applicable Ombud, Industry Ombud, Consumer Court, alternative Dispute Resolution, the Commission or Court. The National Consumer Tribunal was created in terms of the National Credit Act.
Good, with a side of bad
Most consumers will welcome the Act. The Act extensively protects the rights of consumers and does away with many harmful business practices, much to our relief. The ambit of the Act is extremely wide, the legislature has altered the existing common law quite dramatically in certain instances. Whereas Courts were previously loathe to interfere in contracts concluded between two parties, the Courts will now be given ample powers to effectively “redraft” one’s agreements if the terms contained therein are deemed to be unfair or unjust.
The Act further introduces strict liability to everyone in the supply chain in respect of any goods which are faulty or cause harm. While most provisions will be welcome to protect Consumers, some feel that the Act has gone too far in certain cases and is too vague in respect of others. The uncertainty of the application of the Act in certain circumstances may encourage a flood of complaints and/or litigation which may be an unintended consequence of the Act. Consequences of a consumer’s right to terminate any fixed term agreement, remains a fear for many.
Resources
Marto Lafitte & Associates www.martolafitte.co.za
This article was written by Rui Marto and was taken from the March / April 2010 edition of Real Estate Investor magazine.
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