Short notes on:
EXEMPTION CLAUSES AND CONSUMER PROTECTION ACT
In general exemption clauses contained in agreements are binding and enforceable where the
clause is clear and unambiguous. Public policy requires that courts give effect to exemption clauses
in instances where it entails that the court will by enforcing the clause give effect to the intention of
the parties to the agreement. Thus giving effect to the caveat subscriptor rule of contract that parties
are bound to an agreement that they have signed. The question is however when courts will not give
effect to exemption clauses. The short answer is that exemption clauses that are against public
policy will be unenforceable.
Exemption clauses are especially problematic considering that it in effect excludes liability on the
part of one of the parties to an agreement. Thus it deprives one of the parties of their “rights”, they
in effect waive certain rights. Parties almost never stand in equal bargaining positions and this leads
to the exploitation of one of the parties.
Examples of an everyday exemption clause: Lease agreements excluding liability of the landlord for
certain claims and or injuries, exemption clauses at the entrances of parking lots or malls and gym
contracts. These are only a few examples of where in everyday life parties are faced with exemption
clauses.
There has been various cases in which the courts had to consider whether an exemption clause
should be enforced or not. The latest case was Naidoo v Birchwood Hotel1. In short the Plaintiff,
Naidoo, wanted to exit the premises of the hotel. The gate was not working and when Naidoo walked
toward the gate to establish what the problem was the gate jammed and fell on him, causing serious
bodily injuries. Naidoo held the hotel liable for negligence. The hotel pleaded that they had
disclaimers and exemption clauses printed on the back of the hotel register. Thus when Naidoo
signed the registration card he agreed to the terms and conditions i.e. knew about the exemption
1
2012 6 SA 170 (GSJ)
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clause. The court had to determine whether the exemption clause was binding on Naidoo or if it was
against public policy. Public policy entails notions such as fairness, reasonableness and justice and
these notions should be taken into consideration when establishing if an exemption clause should
be enforced or not. An exemption clause should not be binding if it would result in injustice. As the
court held “if enforcing of the contractual term that limit a person’s right to a judicial remedy would
result in an injustice”. The court in this case found that the enforcement of the exemption clause
would have been unjust and unfair.
The courts have over the years crystalized when exemption clauses will be enforced. In Durban’s
Water Wonderland v Botha 2 the court held that where exemption clauses are clear and
unambiguous they will be given effect to. These clauses will not be given effect to if it is against
public policy, where it is unusual or where the clause was not set out in such a way as to attract the
attention of an ordinarily alert customer.
The Consumer Protection Act (the “Act”)
The Act was drafted in order to protect consumers and does this by regulating exemption clauses
Section 49 of the Act stipulates that the consumer’s attention should be drawn to the following
clauses that might:
1) limit the risk of liability of the supplier or another person;
2) constitute an assumption of risk or liability;
3) impose an obligation on the consumer to indemnify the supplier;
4) be an acknowledgement of any fact by the consumer
The “effect, mature and fact” of abovementioned clause, if included, must be drawn to the consumers
attention in a conspicuous manner and form that is likely to attract the attention of an ordinary
consumer. The terms “fact, nature and potential effect” implies that the consumer should be placed
in a position to make an informed decision i.e. should comprehend what those clauses are stating.
In essence the abovementioned section stipulates that when the abovementioned clauses are
contained in an agreement the consumer should be made aware thereof. It is uncertain what
“conspicuous manner” entails as it is not defined in the Act. The court in the Durban case however
2
1999 1 SA 982 (SCA).
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held that a notice of an exemption should be brought to the attention of the consumer in a reasonable
manner, i.e. a reasonable person should be able to observe and understand the notice or the
provision. This was perhaps what the legislator intended when using the term “conspicuous manner”
Thus in effect if a consumer was made aware of a clause in a conspicuous manner or if he was in
fact aware of it, then the consumer will be bound by the terms.
Section 58 of the Act states that the supplier of any activity that is subject to any risk on unusual
nature, risk a consumer cannot reasonably be expected to be aware or risk that could result in
serious injury must be specifically drawn to the consumer’s attention in the same manner as
stipulated in section 49 of the Act.
Section 48 of the Act deals with unfair, unreasonable or unjust terms and in particular section
48(1)(c) states that a supplier may not require that a consumer waive any rights, assume any
obligation or waive any liability of the supplier on terms that are unfair, unreasonable or unjust.
Section 48 (2) stipulates instances when a clause will be unfair, unreasonable or unjust i.e. it is
excessively one-sided in favour of any person other that the consumer, terms are so adverse to the
consumer as to be inequitable and consumer relied upon a false, misleading or deceptive
representation etc.
Conclusion
The Act goes a long way in regulating exemption clauses, but does not grant much protection to
consumers as exemption clauses are still allowed. The Act furthermore does not necessarily place
the consumer in a better bargaining position as there are still contract which would entail that the
consumer either take-it-or-leave-it. Thus there is not always the notion of freedom of contract.
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