Contract freedoms eroded under the new act
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.