Fixed term con­tracts

Finweek English Edition - - BUSINESS -

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-

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