The CPA protects consumer rights and places obligations on the manufacturing, retail and supply industries.
Rights such as the right to cancel a fixed-term contract before the expiry of its term and the right to cancel an agreement entered into as a result of direct marketing, are just some of the rights entrenched in the CPA. Direct marketing and the manufacturing industries are regulated. Marketing practices such as bait marketing, referral selling and negative option marketing are prohibited. Loyalty programmes and promotional competitions are regulated as is the practice of overbooking and overselling. The common law in as far as it relates to unfair contract terms is codified and certain warranties in respect of new and repaired goods are fixed. Further, consumer protection and recourse in instances where consumer rights are violated are covered in the CPA. Like the NCA established the National Consumer Tribunal, the CPA establishes the National Consumer Commission. The National Consumer Commission is tasked with the responsibility of enforcing the provisions of the CPA and ensuring that consumers are educated and well-informed when it comes to the protection of his or her rights.
Just who does the CPA give a voice to?
The CPA stipulates who may approach a court, the National Consumer Tribunal or the National Consumer Commission to enforce the rights granted by the CPA. Any of the following persons may, in the manner provided for in the CPA, approach the above tribunals to allege that a consumer right entrenched in the CPA has been infringed, impaired or threatened or that prohibited conduct has occurred or is occurring:
- A person acting personally
- An authorized person acting on behalf of another person who cannot act in his or her own name
- A person acting as a member of, or in the interest of, a group or class of affected persons
- A person acting in the public interest with leave of the Tribunal or court
- An association acting in the interest of its members
What does the CPA Regulate?
The CPA regulates the goods and services industries.
“Goods” include –
- anything marketed for human consumption;
- any tangible object not otherwise contemplated in paragraph (a), including any medium on which anything is or may be written or encoded;
- any literature, music, photograph, motion picture, game, information, data, software, code or other intangible product written or encoded on any medium, or a licence to use any such intangible product;
- a legal interest in land or any other immovable property, other than an interest that falls within the definition of ‘service’ in this section; and
- gas, water and electricity
“Services” include, but are not limited to –
- any work or undertaking performed by one person for the direct or indirect benefit of another;
- the provision of any education, information, advice or consultation, except advice that is subject to regulation in terms of the Financial Advisory and Intermediary Services Act;
- any banking services, or related or similar financial services, or the undertaking, underwriting or assumption of any risk by one person on behalf of another, except to the extent that any such service –
- constitutes advice or intermediary services that is subject to regulation in terms of the Financial Advisory and Intermediary Services Act; or
- is regulated in terms of the Long-Term Insurance Act, or Short-Term Insurance Act;
- the transportation of an individual or any goods;
- The provision of –
- any accommodation or sustenance;
- any entertainment or similar intangible product or access to any such entertainment or intangible product;
- access to any electronic communication infrastructure;
- access, or a right of access, to an event or to any premises, activity or facility; or
- access to or use of any premises or other property in terms of a rental;
- a right of occupancy of, or power or privilege over or in connection with, any land or other immovable property, other than in terms of a rental; and
- rights of a franchisee in terms of a franchise agreement.
A “Quasi-Bill of Rights for Consumers
The CPA essentially entrenches a “quasi-Bill of Rights” for consumers. The rights entrenched are as follows:
- The right to Equal Access to the Consumer Market;
- The right to Confidentiality and Privacy;
- The Right to select suppliers and choose goods;
- The right to disclosure and information;
- The right to Fair and Responsible Marketing & Promotion;
- The right to Fair and Honest dealing;
- The right to Fair, Just and Reasonable Terms & Conditions;
- The right to Fair Value, Good Quality and Safety;
- The right to hold Supplier’s Accountable
A Snapshot of Some of the Salient Aspects of the CPA
Cancellation of Advance Bookings, Orders & Reservations
Essentially, consumers have the right to cancel a reservation or pre-booking for any goods or services and to cancel any order for any goods or services. Franchisees in terms of a franchise agreement and a consumer in terms of a transaction or agreement for any goods made by way of special-order are excluded from enjoying this right.
Suppliers may still require payment of a reasonable deposit in advance and impose a reasonable charge for cancellation of the order or reservation. However, if a consumer dies before carrying out a reservation or advance booking for a service, the supplier may not charge a cancellation fee and must refund any deposit to the administrator of the consumer’s estate. In any other instance where a consumer cancels a reservation or advance booking, the supplier may charge a cancellation fee provided such fee is reasonable. In determining what is reasonable, regard must be had to the nature of the services or goods that were reserved or booked. Other factors such as the length of notice of cancellation provided by the consumer; the reasonable potential for the service provider, acting diligently, to find an alternative consumer between the time of receiving the cancellation notice and the time of the cancelled reservation and the general practice of the relevant industry.
A cancellation fee may also not be charged where the consumer is unable to honour a booking, reservation or order, due to the death or hospitalisation of the person for whom, or to whose benefit the booking, reservation or order was made.
Expiry and Renewal of Fixed-Term Agreements
Consumers may cancel a fixed-term agreement (of any term) at any time, provided written notice is given to the supplier at least 20 business days prior to the intended date of cancellation. Where the consumer prematurely cancels the agreement, the consumer remains liable to the supplier for any amounts owed to the supplier in terms of that agreement up to the date of cancellation and the supplier may impose a reasonable cancellation penalty.
The Minister of Trade and Industry may prescribe the maximum duration of a fixed term agreement, generally, or for specified categories of such agreements as well as the manner, form and basis for determining reasonableness of credits and charges, for instance cancellation penalties.
Suppliers may also cancel a fixed-term agreement at anytime but only where the consumer has committed a material breach of the agreement. The supplier to a fixed term agreement may also cancel the agreement within 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 in that time.
In the event that neither the consumer nor the supplier prematurely terminate a fixed term agreement and the agreement runs its course, it will be automatically continued on a month to month basis unless the consumer expressly directs the supplier to terminate the agreement on the expiry date or agrees to a renewal of the agreement for another fixed term.
The automatic renewal of contracts is only permissible where the supplier has given the consumer a written notice of the impending renewal. This notice must be given not more than 80 business days and no less than 40 business days before the intended date of cancellation. Where such notice is given, the supplier must also notify the consumer of any material changes to the agreement and the options the consumer has. Where a consumer does not agree to the renewal of an agreement or does not direct the supplier to terminate the agreement, the agreement shall continue on a month-to-month basis.
The provisions pertaining to the expiry and renewal of fixed-term agreements do not apply to transactions between juristic persons regardless of their annual turnover or asset value.
Quotes and Estimates
Suppliers may not charge consumers for repairs, maintenance work or any other diagnostic work unless the charge was previously disclosed to the consumer and the consumer subsequently accepted the charge. Therefore, suppliers must provide a quote or estimate prior to working on any goods.
It is sufficient that the consumer declines (waives) the offer of an estimate or quote in writing and specifically authorises the work. Suppliers may also require consumers to pre-authorise charges up to a specified maximum and where such authorization is given, the ensuing charges must not exceed this maximum. It is advisable that where such pre-authorisation is given, it is given in writing and signed by the consumer.
The Minister of Trade and Industry is empowered to prescribe a monetary threshold to be used when determining whether an estimate is necessary.
Quality Service – Now a Right!
Where a supplier undertakes to perform any service for or on behalf of a consumer, the consumer has the right to the timely performance and completion of those services. Where there is an unavoidable delay in performing or completing the services, the supplier must timely notify the consumer of this fact. The rendering of services or the goods required to perform any service must therefore be in a manner and of a quality that persons are generally entitled to expect and be free of any defect.
Where a consumer makes available to the supplier any property for the purpose of performing any services, the consumer is entitled to the return of the property in at least as good condition as it was when the consumer made it available to the supplier..
Where a supplier fails to perform the service according to the above standards, the consumer may call on the supplier to remedy the defect in the quality of the services or goods or to refund a reasonable portion of the price paid for the goods or services. Where a refund is requested, the extent of the failure to observe the entrenched standards shall be taken into consideration.
The Issue of Strict Liability
The CPA imposes strict liability on producers, importers, distributors or retailers for supplying unsafe goods. Strict liability is also imposed in respect of product failure, defective and hazardous goods. This liability shall also arise where a consumer is given inadequate instructions or warnings pertaining to any hazard that is likely to arise from the usage of the goods. Liability is said to be “strict” as a producer, importer, distributor or retailer shall be held liable irrespective of “whether the harm resulted from any negligence on the part of the producer, importer, distributor or retailer.” Such liability is joint and several and extends to suppliers of services whose rendering of services necessitates the application, supply, installation or provision of access to goods.
Warranty on Repaired Goods
A mandatory three month warranty period is imposed on service providers who install any new or reconditioned part during repair or maintenance work. This three month period is calculated from the date of installation of the new or reconditioned part. Service providers include persons who promote, supply or offer to supply any service.
The above warranty is concurrent with any other deemed, implied or express warranty but does not apply to ordinary wear and tear. In determining what is ordinary wear and tear, the circumstances in which the goods are intended to be ordinarily used shall be taken into account. It is important to note that where the consumer has misused or abused the goods or the property in which the goods were installed, the warranty shall be void.
Right to Return Goods
A consumer is entitled to return unsafe or defective goods, including goods that are not of a good quality. This right is enforceable for a period of six months, calculated from the date of the delivery of the goods to the consumer. Where the goods are so returned, the consumer does so without penalty and at the supplier’s risk and expense.
If the goods are prematurely delivered to a consumer, the consumer may accept delivery or require delivery or performance at the agreed time and date. The consumer may also cancel the agreement without penalty and treat the delivered goods or services as “unsolicited goods or services.”
Unsolicited Goods or Services
A consumer who is the recipient of unsolicited goods or services is not obliged to pay for such goods or services. Goods or services shall be said to have been “unsolicited” if the consumer did not implicitly or expressly request the goods or services. The only exception is where the consumer has an agreement with the supplier that goods or services shall be supplied from time to time without further approval or request. However, in the latter instance, any goods or services that materially differ from that agreed upon shall be deemed to be unsolicited.
A recipient of unsolicited goods may retain the goods without payment or return the goods to the supplier at the supplier’s risk and cost. After 10 business days have lapsed since receiving the goods, and the supplier has not indicated that the delivery was erroneously made, ownership in the unsolicited goods will pass to the consumer. The consumer does not have to make any payment in respect of unsolicited goods. In fact, a consumer who has paid for unsolicited goods or services may recover the amount paid with interest calculated from the date such payment was made. This means that the supplier, that is, the former owner of the goods, cannot institute action for the return of goods where such goods were delivered in error or as a result of fraud or theft.
Where the supplier mistakenly delivers goods to a consumer, the supplier must inform the consumer that the goods were delivered in error and this must be done within 10 business days of having delivered the goods. If after informing the consumer, the supplier fails to recover the goods within 20 business days, the goods become unsolicited. The consumer would then not be obliged to pay for the unsolicited goods or services.
In instances where a consumer has made any payment to a supplier for unsolicited goods or services, the consumer is entitled to recover that amount paid, together with interest from the date on which it was paid to the supplier.
Right to Cancel a Transaction or Agreement emanating from Direct Marketing
Direct marketing means approaching someone (in person or by mail or electronic communication – phone, fax, SMS, email, etc) to try to sell goods or services to that person or to ask him or her to make a donation of any kind.
Where a transaction resulted from direct marketing, the consumer to such a transaction may rescind the transaction without reason or penalty. To do so, the consumer must give written notice to the supplier of his intention to cancel the transaction in question. This notice must be given within five business days of the transaction or agreement being concluded or, within five business days of the goods having being delivered to the consumer.
Where the consumer exercises the above right, the supplier must return any payment received from the consumer in terms of the transaction within 15 business days after receiving the notice of the rescission, if no goods had been delivered to the consumer in terms of the transaction, or within 15 business days of receipt of the goods from the consumer. Further, the supplier may not attempt to collect any payment in terms of a rescinded transaction, except to the extent permitted in terms of section 20(6).
Over-booking and Over-selling
Suppliers must take heed not to oversell any goods or overbook any services. Section 47 of the CPA prohibits suppliers from accepting payment or other consideration for any goods or services if the supplier has no reasonable basis to assert an intention to supply those goods or services or, the supplier in fact intends to supply goods or services that are materially different from those advertised or sold.
Where a supplier accepts a reservation or otherwise commits to supply goods or services on a specified time and date, the supplier must ensure that there is sufficient stock or capacity to supply the goods or services, failing that, that there is alternative goods or services that are of a comparable nature and of the same, if not better, quality, class or nature.
If a supplier oversells or overbooks, the supplier must refund the consumer the amount, if any, paid in respect of that commitment or reservation, together with interest at the prescribed rate from the date on which the amount was paid until the date of reimbursement. Further, the supplier must compensate the consumer for costs directly incidental to the supplier’s breach of contract. Where a supplier is not able to supply the goods or services due to a shortage of stock or capacity and the supplier has taken reasonable steps to inform the consumer of the shortage of stock or capacity as soon as it was practicable to do in the circumstances, the consumer is not entitled to claim compensation for costs directly incidental to the supplier’s breach of contract. The shortage of stock or capacity must however be due to circumstances beyond the supplier’s control. It is not “due to circumstances beyond the supplier’s control” if the shortage results partially, completely, directly or indirectly from a failure on the part of the supplier to adequately and diligently carry out any ordinary or routine matter pertaining to the supplier’s business.
The provisions pertaining to overbooking and overselling do not apply to franchise agreements or to consumer agreements pertaining to the supply of special-order goods.
Marketers shall have to align their marketing practices with the CPA. The CPA seeks to regulate marketing practices by entrenching consumers’ right to fair and responsible marketing.
Marketing Standards for Goods & Services
Goods or services must not be promoted in a misleading, fraudulent or deceptive manner. Thus, the nature and the use of the goods or services cannot be distorted, let alone the conditions on which the goods or services may be acquired.
A manufacturer, producer, importer, distributor or supplier cannot promote or supply goods or services that are unlawful. Promotion of goods or services must so be done in a manner that does not violate the dignity of any person or is based on a ground of unfair discrimination.
A supplier is prohibited from advertising goods or services as being available at a particular place and price for a particular period unless the supplier reasonably anticipates having a sufficient quantity of the goods or capacity to supply the services so advertised. If the supplier is not sure of the quantity will meet the demand for the goods or services, then the advertisement must specify that the goods or services are available in a specified limited quantity at the specified price, at a specified time or limited duration or until the quantity is exhausted.
If for some reason the supplier cannot supply the goods or services so advertised, the supplier can procure another person to supply the advertised goods or services provided the consumer accepts such an offer.
Negative Option Marketing
A supplier must not offer to supply or enter into or modify an agreement on the basis that if the consumer fails to decline such an offer or modification, then the agreement or modification will automatically come into existence. If negative option marketing results in an agreement, such an agreement is unlawful. Similarly, if a modification is made on the basis of negative marketing, such modification is deemed to be an unlawful provision and is void.
Direct Marketing, Installation and Delivery
Any person who directly markets any goods or services and subsequently concludes a transaction or agreement with a consumer must inform the consumer of the right to rescind the agreement. This right is set out in section 16 of the Act and is as follows:
“A consumer may rescind a transaction resulting from direct marketing without reason or penalty, by notice to the supplier in writing, or another recorded manner and form, within five business days after the transaction or agreement was concluded or the goods that were the subject of the transaction were delivered to the consumer.” Where a consumer exercises this right, the supplier must refund the consumer any payment received and such a refund must be effected within 15 business days after receiving notice of the rescission if no goods were delivered to the consumer. Where goods have been delivered to the consumer, the refund must be effected within 15 business days of receiving the returned merchandise.
Suppliers may not charge the consumer or levy any penalty for the consumer rescinding the agreement. However, suppliers may charge consumers a reasonable amount where goods have been opened but repacked in their original packaging provided the goods are in their original condition. This charge shall be for the use of the goods during the time they were in the consumer’s possession, unless they are goods that are ordinarily consumed or depleted by use, and no such consumption or depletion has occurred. Suppliers may also charge for any consumption or depletion of the goods, unless the consumption or depletion was necessary to determine whether the goods were acceptable to the consumer.
Direct marketers must not leave any goods with a consumer without requiring or arranging payment for them. In the event that goods are left without the consumer specifically requesting or ordering them, and the marketer neglects to request payment, such goods shall be deemed to be unsolicited goods, to which section 21 shall apply.
Catalogue or Electronic Marketing
The requirements regarding catalogue or electronic marketing apply where an agreement for the supply of goods or services is not concluded in person, but is concluded telephonically at the request of the consumer, by postal order, fax or internet transaction or in any other instance where the consumer does not inspect the goods before concluding the agreement. The requirements do not extend to an agreement or transaction that ensued from direct marketing.
Before entering into an agreement that has resulted from marketing in which the consumer was not afforded the opportunity to inspect the actual goods, the supplier is required to disclose the following to the consumer:
- The supplier’s name and licence or registration number if any
- Supplier’s physical address and other contact details
- Full sales record, for instance, the unit price of the goods or services; the quantity of goods or services supplied; the total price of the transaction, before tax; any applicable taxes and the total price of transaction (see section 26 which sets out the mandatory information that must be contained in a sales record)
- The supplier’s electronic mail address if applicable
- A trade description of the goods or services
- The currency in which the amounts under the agreement are payable
- Any delivery arrangements i.e. identity of the shipper, mode of transportation and place of delivery
- The supplier’s cancellation, return, exchange and refund policies
- The procedure to lodge a complaint
The above information must be provided to the consumer PRIOR to concluding the agreement. Further, the consumer must be afforded the opportunity to accept or decline the agreement, to correct any errors in the information and to confirm the details of the transaction.
A copy of the agreement must be given to the consumer within 10 business days after the conclusion of the agreement. If such a copy is not delivered within this time period, the consumer may terminate the agreement without any penalty.