The Consumer Protection Act
The Consumer Protection Act creates wide powers for the court to strike out terms in a contract
more generally. Why is it better for this to be controlled by legislation rather than by the courts
through precedent? Legislation creates certainty, and gives a clear indication in advance of which
terms should be avoided and which should be approached with caution. Legislation is also more
accessible than precedent set by the court. It is easier for consumer advisors, who are not lawyers,
to determine what is allowed or not. Courts can also only decide on the particular case or term in
front of them, so it would take a long time before there is any kind of certainty. Legislation creates
proactive control. Suppliers are more likely to react spontaneously to a list of prohibited terms than
if they are told in vague terms to remove terms that are contrary to public policy. Control through
the courts is reactive. Court based control is also very expensive for consumers, and most consumers
do not have the money to take their contracts to court.
Unfortunately the drafters of the Act did not always keep these reasons in mind when drafting the
act. The major problem is that they did not do proper comparative research (they didn’t look into
other jurisdictions). They also did not take into account the Commission’s Bill of 2008.
Scope of the Act with regard to time
The Act came into force on 31/3/2011, but the regulations were only introduced on 1/4/2011. Parts
of the Act came into force on 24/4/2010. Section 61 applies to goods supplied after this date. This
relates to product liability, and creates no fault liability for harm caused by damages goods in terms
of injury or damage to property. The producer, or the importer, is directly liable to the consumer,
with no need to prove negligence or the existence of a contract between themselves and the
consumer. The intermediaries have an ‘absence of negligence’ defence – the onus is on them to
prove that they were not negligent once the consumer has proven that the goods were defective
and that he suffered harm. Certain parts of the Act also apply to pre-existing agreements (concluded
before 31 March 2011). This is set out in Schedule 2, Item 3. This list only applies if the preexisting
agreement is for a fixed term that would last at least until 31/3/2013. Provisions on unfair contract
terms to dot apply to pre-existing agreements.
Scope of application of the Act more generally
Section 5, read with the definitions in s 1. Section 5 states that the Act applies to the supply of
goods and services by suppliers to consumers in the ordinary course of business, for consideration.
Consideration means in exchange for something else. Goods and services are widely defined
(schools, electricity, anybody who charges any form of payment), provided that it is in the ordinary
course of business. Business is defined as the continued marketing of any goods or services, and
marketing is defined as continuous promotion or supply. Suppliers are not only normal businesses
that run for a profit; clubs and trade unions etc. are also suppliers under the Act. The state
(municipalities, organs of state etc.) is also a supplier under the Act. The Minister has exempted low
capacity municipalities from the application of important provisions in the Act, particularly
provisions relating to the quality of goods and services.
Consumers: Is a sole trader who buys stock for his business protected under the Act? Yes, because
he is a natural person. All natural persons are protected, whether they are buying for their business
or not. Juristic persons (including partnerships and trusts, for the purposes of the Act) are protected
if they have an asset value of less than R2 million and have a turnover of less than R2 million. Sole
traders are protected regardless of their asset value or turnover. Franchise agreements: the
relationships between the franchisor and the franchisee are completely protected by the Act. If they
buy from a third party they may not be protected if their turnover is less than R2 million.
Insurance contracts: The Act excludes certain agreements governed by specific legislation. One
important exclusion is any agreement for a supply of services dealt with by the Financial Advisory
and Intermediary Services Act of 2002. In the definition of services the Act excludes services subject
to the Long Term and Short Term Insurance Acts subject to a condition: the exclusion of the
Insurance Acts is subject to those sector laws being aligned with the protection measures provided
for in the CPA within a period of 18 months, failing which the provisions of the CPA must apply. Go
find out what has happened with these Acts (had to be brought in line by 30 Sept 2012). The
Financial Services General Amendment Bill (FSB) is in parliament at the moment (this relates to the
Long Term Insurance Act). This is going to introduce more extensive legislation than the CPA and
they want all their contracts to be governed by their legislation alone. It was only introduced on 25
Sept 2012 – and one of the provisions is that everything under the FSB must be excluded from the
CPA, and one of the campaigns contemplated under the Act is “treating consumers fairly” (taken
from England). Is the CPA applicable until this Act is passed? Go find this out.
The Credit Agreement Act: credit agreements governed by this Act are excluded from the CPA, but
the goods or services that are the subject of the credit agreement are not excluded from the ambit
of the Act. It is not 100% certain what this means. Marketing of credit agreements (advertising etc.)
is not excluded from the CPA. The goods or the services are also still subject to the Act, thus
provisions relating to the quality etc. of the goods will still apply.
The scope of the Act does not extend to employment contracts (the employer is not regarded as a
consumer); these are governed by the labour law legislation. A regulatory authority may apply for an
industry wide exemption from one or more provisions on the grounds that these provisions overlap
or duplicate a regulatory scheme administrated by the authority in terms of any other legislation.
Section 61 on product liability for damage caused by defective goods will always still apply to each
and every transaction.
Practical example: What are the consequences of the claim below?
“The company shall not be liable to the customer for any loss howsoever caused, except for harm
intentionally caused and the customer hereby indemnifies the company against any claim arising
from or connected to this agreement”.
Section 49: Four types of clauses have to be conspicuous:
1. indemnity clauses,
2. exemption clauses,
3. assumptions of risk; and
4. acknowledgments of fact.
These must be drawn to the attention of the consumer in a conspicuous manner and form, likely
to attract the attention of an ordinarily alert consumer. This does not mean that they actually have
to be pointed out, just that they must be so conspicuous that an alert consumer would see them.
This must be done before the consumer enters the transaction/facility and before he is required to
offer consideration. There have been no cases on this yet, but it would probably not be enough for
the supplier to place a term like this on the back of a form, even if it is in bold. Also, this clause is not
in plain language.
These clauses must all be in plain and understandable language. This is defined in s 22 of the Act.
The test is that it must be understandable by the average consumer in the class of consumers for
which the notice is intended, with average literacy skills and minimal experience in the type of goods
or services in that sector. They average consumer must understand the content, the import and the
significance of the agreement. Section 22 also lists factors to look at: the context, the
comprehensiveness, the consistency, the organization, the form and style of the document, the use
of any headings etc.
Section 49 also requires that the consumer must be given an adequate opportunity to
comprehend/understand the agreement. Some types of these clauses must also be signed or
initialed next to the particular clause of the consumer must have otherwise acted in a manner
consistent with knowledge of the notice or term. The terms that require signatures/initials are terms
relating to unusual risks, which the consumer wouldn’t foresee when he signed it, or terms relating
to bodily injury or death.
Effect if an exemption clause does not comply with s 49 requirements: Section 52(4) says that if a
clause does not comply with s 49 the court may make an order severing the provision or notice from
the agreement or declaring it to have no force or effect with regard to the transaction. It is unclear
whether this provision applies extra-judicially, or whether the consumer has to go to court to have it
declared void.
Criticism of this s 49: Requiring consumers to sign next to certain clauses seems to work against
consumers. It implies that the term itself is ok, as long as the consumer signs. Terms of this sort,
particularly relating to bodily injury or death are usually unfair, regardless of whether the consumer
knew about it or not. In draft legislation in Europe there is a total prohibition on these sorts of
terms. The trend in Europe is to go against counter-signing.
Section 50 deals with written agreements, and requires that any written agreement must be in
plain language. Thus it must satisfy the requirements of s 22. The consumer has the right to a free
copy or a free electronic copy. The document must also itemize the consumer’s financial obligations
under the agreement. If the agreement is entered into over the phone, the supplier must keep a
record of the agreement.
The content of the clause: even if the clause complies with the formal requirements of s 49 and 50,
the term may still be unfair under s 48.
Section 48 requires that all terms must be fair and just and reasonable. This includes terms relating
to the price. In Europe terms relating to the price are excluded from review because the consumer is
expected to know the prices of different goods. All they require is that the price be set out in a clear
and determinable manner. However, in SA every single term is subject to review on the basis that it
is unfair. This is quite radical. A term will be unfair if it is excessively one-sided in favour of any
person other than the consumer or if the terms are so adverse to the consumer as to be inequitable.
Section 48 also states that a term is unfair if the consumer relied on a false or misleading
misrepresentation as dealt with in s 41. The term is unfair if the transaction or agreement is subject
to a notice or term contemplated in s 49 and the nature of the term was not drawn to the attention
of the consumer (it does not comply with the requirements). These tests are not very helpful when
we are trying to determine what is unfair or not. There is a ‘grey list’ of terms which are presumed to
be unfair.
Section 52(2) lists factors which the court must take into account when determining whether a term
is unfair. Most of them relate to procedural unfairness, and ignore the actual content of the term.
The list includes:

the fair value of the goods or services,

the nature of the parties to the transaction, their relationships, their relative capacity,
education, bargaining position, sophistication (the characteristics of the particular
consumer),

circumstances that existed or were reasonably foreseeable at the time the agreement was
made, irrespective of whether the Act was in force at the time,

conduct of the consumer and the supplier,

whether there was negotiation, whether the consumer was required to do anything that
was not reasonably necessary for the legitimate interest of the supplier (interest analysis –
balance interest of the supplier against the interest of the consumer),

the extent to which any documents relating to the agreement satisfied the requirements of s
22 (plain language – this gives the impression that the mere fact that a document is not in
plain language is not enough to strike it out, as it is only a factor in the fairness enquiry),

whether the consumer knew of the existence of or extent of any term having regard to any
customs or trade or any previous dealings between the parties,

whether the goods were manufactures, processed or adapted to the special order of the
consumer (more reason to uphold the exemption clause in this case).
Section 51 gives a list of prohibited terms. Any term contrary to any provision in the Act in always
void.
Section 51(2) mentions five other terms that are always void:

Any liability for gross negligence may never be excluded. However, technically it is possible
to exclude liability for services performed negligently, unless it involves goods being held in
the care of the supplier.

False acknowledgments that no misrepresentations were made or that no documents were
received are also prohibited. However, this does not expressly prohibit the supplier from
excluding any true representations. The supplier will no longer be able to rely on oral
acknowledgments.

Forfeiture clauses to which the supplier is not entitled to by law.

Cessions of claims to the Guardians Fund.

Unfair enforcement clauses: for example, a form requiring the consumers to sign
enforcement documents in advance, and a term agreeing that the consumer will hand over
his credit card in case he doesn’t pay.
Section 52 refers to the powers of courts to ensure fair and just conduct, terms and condition. It tells
us what kind of orders a court can make if it finds that a transaction is unfair in whole or in part. The
court may make any order that the court considers just and reasonable in the circumstances
including an order to restore money and property to the consumer, an order to compensate the
consumer for loss, and an order requiring the supplier to seize and practice so that a repletion of the
matter is prevented. The word ‘court’ excludes provincial consumer courts. The provisions regarding
enforcement are very unclear.
Does this mean that only the ordinary courts can declare a term unfair? What about the National
Consumer Tribunal? The CPA is not clear in this regard as this section only mentions the ordinary
courts. However, this interpretation conflicts with other parts of the Act. The National Consumer
Tribunal would typically get involved if the National Consumer Commission gets a complaint and
issues a compliance notice to the supplier. The supplier may then appeal/object to the notice in
front of the tribunal. If the conduct of the supplier is prohibited conduct then the tribunal may issue
an administrative fine up to 10% of their annual turnover or R1 million, whichever is the greater.
Thus the tribunal could have the authority to declare a term unfair, because they have the power to
adjudicate on any prohibited conduct in terms of the Act.
Provincial consumer courts: consumer affairs fall under concurrent jurisdiction – the provincial
governments also have the power to create legislation on consumer affairs. All of the legislation in
force is wide enough to give these courts powers to hear matters involving unfair contract terms.
The national legislature cannot just take away this power; therefore they probably still have the
power to hear disputes about unfair contract terms despite s 52 of the Act only referring to the
ordinary courts.
Section 69 states that any person referred to in s 4 may seek to enforce any rights in terms of the
Act by:
1. Referring the matter directly to the tribunal if such a direct referral is permitted by the Act.
2. Referring the matter to the applicable ombud if the ombud has the required jurisdiction in
the matter. This refers to a statutory ombud
3. If the matter does not apply to the particular statutory ombud, referral to the applicable
industry ombud or applying to the consumer court within the province with jurisdiction of
the matter if there is such a court or referring the matter to another alternate dispute
resolution agent contemplated in s 70 or filing a complaint with the Commission or
approaching a court (ordinary court) with jurisdiction over the mater is all other remedies in
terms of National legislation have been exhausted.
Thus a consumer may not go directly to the ordinary courts. A consumer would first have to go to an
ombud, the Consumer Commission or the tribunal before approaching the ordinary courts. This is
unfortunate because small claims courts are generally more accessible than the other methods
mentioned, particularly in poor, rural areas.
The grey list
Regulation 44, CPA Regulations, published on 1 April 2011. The terms in this list are presumed to be
unfair but there is a possibility for the supplier to prove otherwise. The grey list has a more limited
scope than the Act itself – it only applies to true business to consumer agreements. It does not
apply to any business-to-business contracts. The list applies to supplier operating on a ‘for profit’
basis and acting wholly or mainly for purposes relating to his or her business or profession and
individual consumers entering into the contract for purposes wholly or mainly unrelated to his or her
business. Sub-regulation 4 has some exceptions to the list. The list in sub-regulation 3 is not an
exhaustive list of terms that are presumed to be unfair. Terms that fall into sub-regulation 4
(exceptions), a court is still free to declare such a term unfair if it deems fit. Other laws that prohibit
certain terms that are on the grey list override the grey list. There are 28 terms on the grey list,
including:

Excluding liability for death or bodily injury

Excluding any liability for breach of contract

Modifying risk that is detrimental to the consumer

Allowing suppliers to cancel immediately for non-material breach of contract

Restricting the evidence available to the consumer or imposing a burden of proof that
according to the applicable law should rest on the supplier.

Imposing a limitation period that is shorter than is otherwise applicable under other law in
which a consumer may institute legal action

Entitling the supplier to claim legal costs on a higher scale than usual where there is not a
similar term relating to the consumer.