Fixed term contracts
Problems with fixed term contracts that were identified over the years caused the Consumer Protection Act (CPA) to include provisions that rule how f i xed term contracts can be structured. Consumers now have more rights concerning cancelling and continuing with fixed term contracts, but some consumers are still treated unfairly because they are unaware of the provisions of the CPA and what their rights are.
Consumers often complain that they are sti l l not al lowed to cancel f i xed term contracts when they expire or that they are forced to keep paying for a service provided according to a f i xed term contract even if they can no longer use the service.
Yanna Smith found that she could not cancel her cellphone contract when she moved to Namibia. She gave a month’s notice as required, but the company still wanted her to pay the full amount until the expiry date. When she mentioned the provisions of the CPA, the company’s customer service representatives she dealt with knew nothing about it.
When Mariëta Roos wanted to cancel the security contract on her house because nobody came to see what was wrong when the alarm went off in the middle of the night, she was told that it was not possible to cancel, although she had had the contract for seven years. She threatened them with the Consumer Commission and the security company relented.
John van der Merwe questioned the fact that a gym wanted him to sign a t hree- year contract while t he CPA only allows for a two-year contract. He was told t hat he will not qualif y for “the special” if he does not sign up for three years. He then decided to go to another gym. Fixed term contracts and the CPA Section 14 and regulation 5 of the CPA control the use of f i xed term contracts in South Africa. They stipulate how long a f ixed term contract should be and when and how it can be cancelled. Cancelling a fixed term contract According to Section 14 of the CPA, you can cancel a f i xed term contract when it expires without paying any penalty. You only have to pay the outstanding amount owing on the last date of the contract.
Regulation 5 of the CPA sets the maximum period for a f ixed-term contract at 24 months from the date you sign it. It can only be longer if you agree to it and the supplier can show that a longer contract will benefit you f inancially.
In the problem Roos had with the security company, it did not matter that she signed the original contract before t he CPA came i nto operation. She should still have had the choice to renew the contract on a month-to-month basis or renew it for 24 months or longer if she wanted to. Van der Merwe was right about the two-year f ixed term contract, but he could have asked the Commission to force the gym to show why he would only qualify for the special price if he signed a longer contract.
According to the CPA, you can also cancel at any time by giving the supplier 20 business days’ notice in writing, which is exactly what Smith did. However, the supplier can charge a cancellation fee for any goods supplied, services provided or discounts granted up to the date of cancellation. If you paid i n advance, all the money for goods or serv ices you had not received must be repaid.
However, if your f ixed term contract was signed as a result of direct marketing, where you did not approach the c o mpa n y, b u t whe r e y o u we r e approached by the company with a spe-