Explaining the grey listed terms in the Consumer Protection Act (regulation 44)

Regulation 44 of the Consumer Protection Act 68 of 2008 contains a list of terms which are presumed to be unfair. A supplier is allowed to insert these terms. However, where the supplier is providing goods or services to a consumer for purposes wholly or mainly unrelated to his or her business (in other words for private use) these terms will be presumed to be unfair. This article is aimed at making this list more accesible.

Important: This does not constitute legal advice and Esselaar Attorneys will not be liable for any claims arising from your reliance on it. This document is a working document and may change from time to time.

What does this presumption mean?

Normally a consumer will have to prove that a particular term is unfair, unjust or unreasonable (in terms of s 48). The presumption changes this position in respect of the terms listed in reg 44(3). If the supplier wants to insert these terms in the consumer agreement they have to be able to provide a justification (more often than not commercial reasons) for why the particular term is necessary.

The aim of this document is to enable you to identify these terms should they appear in the terms and conditions under review.

I have attempted to re-draft the listed terms into plain language. This is an on-going undertaking. For the original formulation you must consult reg 44(3). I have retained the original numbering for your ease of reference and have included explanatory notes in the footnotes where necessary.

List of grey listed terms:

Important: The terms below are not directly from regulation 44. They have been paraphrased and in some cases interpreted. You should always consult the original wording to ensure that you are interpreting the terms correctly.

A term is presumed to be unfair if:

(a)  It excludes or limits the supplier’s liability for death or injury caused to a consumer by defective, unsafe or hazardous goods.

[1]

(b) It excludes or restricts the consumer’s legal rights or remedies if the supplier breaches (in total or in part) the agreement.[2]

It provides that a consumer cannot deduct any debt owing by the supplier from any debt owed by the consumer to the supplier.[3]

(c) It limits the supplier’s duty to honour commitments made to the consumer by his agents.

It makes the supplier’s obligations under the contract subject to a condition which is entirely under the control of the supplier.

(d) It limits the supplier’s liability for the actions of its employees.[4]

(e) It forces the consumer to pay for any claims which may be made against the supplier by a third party.[5]

(f) It provides that the consumer cannot rely on the fact that the supplier’s claim has prescribed (that more than 3 years have lapsed since the claim became due or the supplier became aware of the debtor and the facts giving rise to the claim).[6]

(g) It provides that the consumer must bear the risk of damage to or destruction of the goods before the goods have been delivered to the consumer.[7]

(h) It provides that the supplier can change the price after the agreement was concluded without giving the consumer the right to cancel the agreement if the consumer is not satisfied with the new price.[8]

(i) It provides that the supplier can change the terms of the agreement (including the characteristics of the goods or services) without the consumer’s consent.[9]

(j) If the supplier has the right to declare that the goods or services which were delivered are in conformity with the contract or if the supplier can determine what interpretation is given to a term of the agreement and the consumer must abide by it.

In effect these two terms are referring to terms which restrict the consumer’s right to declare a dispute with the supplier regarding whether the supplier has performed his part of the contract or a dispute as to what a particular term means.

(k) If it allows the supplier to cancel the agreement without giving the consumer the same right.[10]

(l) If it allows the supplier to cancel an open-ended agreement[11] without reasonable notice, except where the consumer committed a material breach.[12]

(m) If it forces the consumer to pay even if the supplier has not performed or delivered the goods.

(n) If it allows the supplier, but not the consumer, to limit or avoid performance of the agreement.

(o)  If it allows the supplier, but not the consumer, to either renew the agreement or not.

(p)  If it allows the supplier an unreasonably long time to perform.

(q) If it allows the supplier to retain a payment by the consumer where the consumer fails to conclude or perform the agreement, without giving the consumer the right to be compensated in the same amount if the supplier does not perform or fails to conclude the contract.

(r) If it requires the consumer who fails to fulfil his or part of the agreement to pay damages which significantly exceeds the harm suffered by the supplier as a result of the consumer’s failure to perform.[13]

(s) If it allows the supplier to charge an unreasonably high amount for the use of a thing or right, or for performance made, or a unreasonably high reimbursement of expenses when the agreement terminates.[14]

(t) If it allows the supplier to transfer his or her obligations to someone else to the detriment of the consumer, without the consumer’s consent.[15]

(u) It allows the supplier to restrict the consumer’s ability to re-sell the goods by limiting the transferability of any commercial guarantee.[16]

(v) It provides that a consumer must be considered[17] to have made a statement or acknowledgment to his or her disadvantage unless –

(i) a suitable period of time is granted to him or her to consider the statement or acknowledgment; and

(ii) at the commencement of the period the supplier draw the attention of the consumer to the meaning that will be attached to his or her conduct.[18]

(w) It provides that a statement made by the supplier (which is of a particular interest to the consumer) is considered[19] to have reached the consumer (even if it did not) unless the statement has been sent by prepaid registered post to the chosen address of the consumer.

(x) It limits or excludes the consumer’s right to take legal action or exercise any other legal remedy.[20]

This includes terms which limit the consumer to taking their claims to arbitration (unless it is arbitration in terms of the CPA).

(y) It restricts the evidence available to a consumer or places a burden on a consumer to prove something where that burden should actually have been on the supplier.

(z) It imposes a restriction on the time within which a consumer can bring a claim.[21]

(aa) It entitles a supplier to claim legal costs or other costs on a higher scale than usual, where the consumer is not given the equivalent right.[22]

(bb) It provides that the law of another country will apply to the agreement where the agreement was concluded in South Africa and the consumer was residing in South Africa when the agreement was concluded.

 

 

[1] You must keep the definition of ‘defect’ in mind which can be found in s 53(1) of the CPA. It includes any material imperfection in the manufacture of the product as well as any other characteristic which renders the goods or components less acceptable (in the case of manufacturing defects) or less useful, practicable or safe (in the case of other characteristics) than persons would generally and reasonably be entitled to expect.

[2] An example: a term where the consumer cannot cancel the agreement even where the supplier commits a material breach of the agreement. Another example would be where the agreement says that the consumer remains liable for the price even where the supplier has not performed properly.

[3] Such a term would usually (in legalese) provide that the consumer may not set off any debt owed by the supplier against any claim which the supplier has against the consumer. This is listed as but one example of consumer’s ‘legal rights’ which may not be excluded without justification.

[4] An employer’s liability for the liability of its employees is known as vicarious liability.

[5] Such a term is referred to as an indemnity in legalese.

[6] This is a situation where the supplier wants to claim from the consumer. Ordinarily a debt will prescribe 3 years after it became due or 3 years after the supplier (in this case) became aware of the identity of the debtor and of the facts from which the debt arises (s 13 of the Prescription Act 68 of 1969), whichever is the later. This means that once 3 years have lapsed the supplier can no longer bring the claim and the consumer will ‘raise prescription as a defence’. Terms which deprive the consumer of the right to raise this defence are presumed to be unfair.

[7] Under the common law the risk of destruction or damage to the goods passes to the consumer once the price and product have been agreed (the supplier of course has a duty to care for the goods, so if the goods are destroyed or damaged due to the supplier’s negligence, the supplier would be liable). This is normally varied contractually. The CPA changed this by providing (in s 19(2)(c)) that the goods will remain ‘at the supplier’s risk’ until the consumer has accepted delivery.

[8] This does not apply to transactions in transferable securities, financial instruments or other products or services where the price is linked to fluctuations in a stock exchange quotation or index or a financial market rate which the supplier or trader does not control or to the sale of foreign currency, traveller’s cheques or international money orders denominated in foreign currency. It also does not apply to price fluctuation clauses, as long as the method by which the price variation is calculated is expressly described.

[9] This does not apply if the consumer is informed and given the right to dissolve the agreement. It specifically does not apply to financial service providers who reserve their rights to unilaterally change interest rates payable or the amount of other charges, but they must still inform the consumer and give them the right to dissolve the agreement. Lastly, it does not apply to transactions in transferable securities, financial instruments or other products or services where the price is linked to fluctuations in a stock exchange quotation or index or a financial market rate which the supplier or trader does not control or to the sale of foreign currency, traveller’s cheques or international money orders denominated in foreign currency. It also does not apply to price fluctuation clauses, as long as the method by which the price variation is calculated is expressly described.

[10] This does not apply to a supplier of financial services who reserves the right to terminate an open-ended agreement without notice. Such a supplier must immediately inform the consumer.

[11] An open-ended agreement is an agreement with no fixed termination date. The opposite of a fixed term agreement in other words.

[12] A breach will be material if it is sufficiently serious. This will always depend on the type of contract and several tests have developed over the years. For instance that the ‘breach must go to the root of the contract’ or ‘be so serious that the creditor would probably not have entered into the contract had he or she foreseen the breach’ or that the debtor failed to perform a ‘vital part’ of his or her obligations or an ‘essential’ or ‘material’ term of the contract. In the context of the sale of goods or the performance of services this will invariably be either a failure to perform or a failure to pay the agreed price.

[13] These are typically clauses with pre-estimated damages. If you do x you will be liable for Ry in damages. Normally a party to a contract will be entitled to damages, but the exact amount of damages must be proven by that party. Also see s 3 of the Conventional Penalties Act 15 of 1962.

[14] Such a clause could also fall foul of s 48(1)(a)(i).

[15] In legalese this is known as ‘assignment’. The supplier assigns his rights and obligations to a third party. It may also be referred to as ‘delegation’. The supplier assigns (only) his obligations to a third party. For this to be valid you normally require the consent of both parties. Certain terms may also refer to ‘cession’. This is when rights are transferred to a third party. This last category does not seem to be grey listed, because reg 44(3)(t) only refers to obligations.

[16] An instance of this would be to say that the product is guaranteed for 2 years, but that that guarantee will not be honoured if the consumer on-sells the word. The words guarantee and warrantee are often used interchangeably. Strictly speaking, when you undertake strict liability for something relating to performance it is a warranty. Strict liability means that you will be liable for non-performance even if it is through no fault of your own or if performance is actually impossible.

[17] The word which is used here in reg 44(3)(v) is ‘deemed’. This means that the consumer is deprived of the opportunity to prove the contrary.

[18] This is basically a restatement of s 49(1)(d) read with the requirements of s 49(3) (see my note on exclusions of liability).

[19] This is often also referred to as a ‘deeming provision’. The consumer is deprived of the opportunity to prove that the notice did not reach its intended destination.

[20] Here we are dealing with the consumer’s ability to go to court. A good example of such a clause is a time bar clause in terms of which the consumer has a very limited time within which to take a claim against the supplier to court failing which the claim lapses. Any terms limiting the consumer’s right to go to court should be dealt with, with circumspection.

[21] An example of this would be where an agreement imposes a limited period within which the consumer must write a letter of demand or must institute legal proceedings in court. Again time bar clauses come to mind.

[22] Legal costs are normally paid by the losing party to a dispute. I.e. the party who loses the dispute has to pay their own and the other party’s costs. This is done on a tariff which is prescribed in legislation – this is called ‘party and party costs’. This is not problematic. Terms which state that the consumer must indemnify the supplier for legal costs on the ‘attorney-own client scale’ is problematic as this means that the consumer will be liable for the actual legal costs which are much higher than the tariff.

About the Author:

Elizabeth de Stadler
Elizabeth is the quirky one in the company. She specialises in all things Consumer Law, plain language drafting and designing and delivering training. She prides herself on being slightly out there and bringing a fresh perspective to compliance issues. She has a Masters (cum laude – the nerd) in Consumer Law. Elizabeth met Paul in 2011 and joined Esselaar Attorneys (she is still a senior associate at the firm). In 2013 they founded Novation Consulting together. Elizabeth is a bit of a nerd. She is the editor of the Consumer Law Review (you can get it here for free!) and wrote A Guide to the Protection of Personal Information Act with Paul. She is also the author of Consumer Law Unlocked, a co-author of the hefty Commentary to the Consumer Protection Act and wrote chapters on the Consumer Protection Act in The Law of Contract in South Africa and The Law of Commerce in South Africa. She is currently working with Liezl van Zyl from the Stellenbosch University Language Centre on Plain language legal drafting, which will be published in 2017. Elizabeth loves Lego, sneakers, zombies and white wine. She hates comic sans font, sweet potato and most other attorneys. She is allergic to suits and ‘office shoes’ because of the years she worked at Webber Wentzel. She is very scared of moths. It is a thing – read about it. Want to find out more about Elizabeth? Check her out on LinkedIn. Better yet, contact her on elizabeth@novcon.co.za or (021) 481 8004.