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Short notes on:
The Consumer Protection Act: returns, implied warranties and deposits paid by customers
Introduction
The Consumer Protection Act of 2008 (CPA) has significant impact on the effect of the implied warranty and related regulations regarding returns. These provisions will affect all businesses regardless of their position in the distribution chain. Although all businesses defined as suppliers will be affected, retailers and those selling goods will be particularly affected.
Warranties and returns
Often mistakenly called a guarantee, a product warranty relating to goods is a legally binding assurance that the goods have particular properties. In practical terms, the warranty is found in a contract or agreement between buyer and seller. The warranty is invaluable because it provides the buyer with an assurance of quality and also warrants that it will be replaced or repaired within a specific period of time if the product is defective.
According to Advocate NJ Melville, in the common law every agreement for the sale of goods is deemed to have an implied warranty, or term, that the goods have no hidden defect that will make them unfit for the purpose for which they are bought.
Section 56 of the CPA deals with the provisions relating to warranties and section 20 with returns. In terms of section 56:
“1) … In any transaction or agreement pertaining to the supply of goods to a consumer there is an implied provision that the producer or importer, the distributor and the retailer each warrant that the goods comply with the requirements and standards …
2) Within six months after the delivery of any goods to a consumer, the consumer may return the goods to the supplier, without penalty and at the supplier’s risk and expense, if the goods fail to satisfy the requirements and standards contemplated in section 55, and the supplier must, at the direction of the consumer, either — a) b)
Repair or replace the failed, unsafe or defective goods; or refund to the consumer the price paid by the consumer, for the goods.
© Nicolene Schoeman Schoeman Attorneys 2012

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3) If a supplier repairs any particular goods or any component of any such goods, and within three months after that repair, the failure, defect or unsafe feature has not a) b) been remedied, or a further failure, defect or unsafe feature is discovered, the supplier must — replace the goods; or refund to the consumer the price paid by the consumer for the goods….
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This means that all agreements involving the supply of goods are now deemed to have an implied term that the goods are: reasonably suitable for the purposes for which they are intended, of good quality, durable, and comply with the newly set standards. This is in addition to any warranty implied by the common law or expressly given by a supplier. The
CPA is also clear that a consumer may claim against any of the entities in the supply chain. These entities could be the producer, importer, distributor or retailer of the goods
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Section 20 of the CPA states that the consumer may now also return goods for any reason whatsoever within ten business days from taking delivery. When the goods are returned, the supplier must provide a refund for the price paid. The supplier may subtract any charges, for example, the cost of repackaging opened goods. If the goods have not been opened and they are in their original packaging, the supplier may not charge the consumer
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. If the consumer needed to open the goods to determine whether the goods met the description or whether they were fit for their intended purpose, the supplier may not charge for repackaging.
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It is important to note that this section does not apply if the goods were tampered with after they left the supplier’s control and this tampering renders the goods unfit for purpose.
Section 20(3) states that certain goods may not be returned. This applies to, among others, cases that may affect public health or a public regulation prohibits the return of goods to a supplier once they have been supplied; for example, medicine that a pharmacy has dispensed to a customer
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Deposits
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Melville 2010: 105.
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Section 20(4) of the CPA.
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Sections 20(5) and 20(6)(a) of the CPA.
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Jacobs, Stoop & van Niekerk 2010: 26.
© Nicolene Schoeman Schoeman Attorneys 2012

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Under section 65 of the CPA, a supplier must take reasonable care and exercise diligence in looking after a consumer’s property. A supplier will be liable for any loss where they have not taken reasonable care.
“ … 2) When a supplier has possession of any prepayment, deposit, membership fee, or other money, or any other property belonging to or ordinarily under the control of a consumer, the supplier — a) must not treat that property as being the property of the supplier; b) in the handling, safeguarding and utilisation of that property, must exercise the degree of care, diligence and skill that can reasonably be expected of a person responsible for managing any property belonging to another person; and c) is liable to the owner of the property for any loss resulting from a failure to comply with paragraph (a) or (b)… .”
Conclusion
We recommend that suppliers revise their return and warranty policies. They should also ensure that they treat all deposits with the necessary care and skill by keeping those safe and separate from other business debts. This is relatively easy for professions such as attorneys and estate agents who have trust accounts, but the application to other suppliers still seems very unclear.
© Nicolene Schoeman Schoeman Attorneys 2012