Con­tract free­doms eroded un­der the new act

Business Day - Business Law and Tax Review - - BUSINESS LAW & TAX REVIEW - Pa­trick Bracher

The ‘as is’ clauses (voetstoots) are no longer pos­si­ble where goods are sold to a pro­tected con­sumer

SUP­PLI­ERS of goods and ser­vices who con­tract with con­sumers un­der the Con­sumer Pro­tec­tion Act will find that se­ri­ous in­roads have been made into the right to free­dom of con­tract.

See­ing that these pro­vi­sions only ap­ply to cus­tomers who are pro­tected by the leg­is­la­tion, many sup­pli­ers will find that they have two dif­fer­ent stan­dard forms of con­tract depend­ing who the cus­tomer is. It is widely be­lieved that the thresh­old will be R5m. Any com­pany, close cor­po­ra­tion, trust, part­ner­ship, as­so­ci­ate or body cor­po­rate with an as­set value or an­nual turnover be­low the thresh­old and ev­ery in­di­vid­ual cus­tomer will be en­ti­tled to a pro­tected con­tract while more sub­stan­tial ju­ris­tic per­sons will have the tra­di­tional form of con­tract.

A good ex­am­ple is the “as is” or voetstoots clause, lit­er­ally sell­ing goods with a shove of the foot which says “take it as it is with all its faults”. In the ab­sence of fraud the “as is” seller is not li­able for any de­fect in the thing sold. But “as is” clauses are no longer pos­si­ble where goods are sold to a pro­tected con­sumer. In any trans­ac­tion (ex­cept an auc­tion sale) re­lat­ing to the sup­ply of goods to a con­sumer there is an im­plied war­ranty by the pro­ducer or im­porter, dis­trib­u­tor, re­tailer of the goods that the goods are rea­son­ably suit­able for the pur­poses for which they are usu­ally in­tended, are of good qual­ity, in good work­ing or­der, free of de­fects and will be us­able and durable for a rea­son­able pe­riod of time in nor­mal use. Those are ex­ten­sive war­ranties of suit­abil­ity and qual­ity. It will not mat­ter whether the de­fect is la­tent or patent.

Al­though the war­ranty of suit­able, de­fect-free, qual­ity goods in work­ing or­der will not ap­ply if the con­sumer ac­cepts that the goods supplied were in a specif­i­cally de­scribed con­di­tion, this ex­cep­tion can­not be eas­ily re­lied upon. It is dif­fi­cult to sell any­thing sub­ject to an agree­ment that specif­i­cally de­scribes the un­suit­abil­ity or poor qual­ity of goods be­ing sold. No­tion­ally you could tell the buyer that the goods in ques­tion are cheap and nasty but at the ex­pense of sales.

Ex­emp­tion clauses ex­clud­ing the li­a­bil­ity of a sup­plier of goods or ser­vices to con­sumers are pos­si­ble but can­not be hid­den in small print. Pro­vi­sions in a con­sumer agree­ment that lim­its the risk or li­a­bil­ity of the sup­plier or re­quires the con­sumer to in­dem­nify the sup­plier against losses must be drawn to the con­sumer’s at­ten­tion in plain lan­guage and in a con­spic­u­ous man­ner.

These ex­emp­tion clauses will have to be high­lighted in clear lan­guage. If any warn­ing no­tice re­lates to an ac­tiv­ity or ac­cess any fa­cil­ity where there is any un­usual or un­ex­pected risk, the sup­plier (for in­stance, one pro­vid­ing recre­ational ac­tiv­i­ties) must draw the na­ture and po­ten­tial ef­fect of the risk to at­ten­tion of the con­sumer who must agree in writ­ing

If you overdo the sales talk you will end up be­ing bound by the prom­ises you make no mat­ter how firmly your tongue is in your cheek

or by clear con­duct to ac­cept the risk.

Other fa­mil­iar clauses no longer ap­ply to pro­tected con­sumers. Pre­con­trac­tual rep­re­sen­ta­tions will be bind­ing on the sup­plier. If you overdo the sales talk you will end up be­ing bound by the prom­ises you make no mat­ter how firmly your tongue is in your cheek. Any ex­ag­ger­a­tion or mis­lead­ing state­ment will be pro­hib­ited and am­bi­gu­i­ties will be in­ter­preted against the sup­plier.

To cap it all, the price and the terms of the deal must not be un­fair, un­rea­son­able or un­just and the courts can de­ter­mine whether sup­pli­ers have crossed the line. When the mat­ter is chal­lenged in court you will never know till the day of judg­ment (in the nar­row sense) whether the court is go­ing to re­write your con­tract or ad­just the price.

Sup­pli­ers of goods and ser­vices will have to go through all their con­tracts care­fully to see that they do not ig­nore the long list of prac­tices that are no longer pos­si­ble when sup­ply­ing pro­tected con­sumers.

Pa­trick Bracher is a se­nior di­rec­tor at Deneys Reitz.

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