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Mitchell’s Plain Money $$$

Our younger generation who are aiming to get a credit / store card, loan or buying a house. Some important notes for you before you venture into a contract.

Within South Africa is it important to be cautious and careful when reviewing your Credit Report.  Many South Africans do not realize how much this Online Credit Report data can affect the financial health or the records that stick with you whenever you look for employment, apply for Credit Cards or other things like Home Loans.  Therefore we encourage you to obtain a Free Credit Report .

 

You will most probably find you / you and your partner decide to buy a home / car etc. You work out your finances and all seem well till one day the economy goes crazy and the interest rate shoot up by 5%. Your affordability has just gone down the drain and your dreams crushed as you will probably loose or sell your dream after this. Make sure that when you do invest in something long term you can afford it, taking a risk is easy, maintaining the risk is the hard part.

 

Take yourself at least one saving policy over a period of 10 years or something similar where savings accumulate interest. This will become one of your assets in the future. I am a firm believer in paying for cash for everything but because we were born to be independent we tend to go one step further and just buy the car / house we want without really looking at the bigger picture. As a youngster you want all this and more but remember one mistake many make are the ones that affect them a lifetime (eg judgements and defaults). Yes they can be rescinded even removed from your credit profile, but this can cost you thousands as well.

 

Important: Any letter that has Without prejudice on it, you may not use to defend yourself.(in court) Thus make sure you have letters that does not reflect that, even if it is one of your creditors sending you a letter promising you the world with it on, it’s like crossing my fingers when making a promise.

Keep all communication in writing, may it be postal or email, and keep it for 5 years, as many companies buy each other’s debts you will find people calling you and charging you for something you thought is long finish. Then you realize it reflects on your credit profile, no wonder you can’t get that credit card, car or house.

I will explain contracts, do not sign a contract you not sure of, you have the right to bring along someone who you think can assist you in understanding it better. Even if you really desperate, learn from others mistake and yes take your grandparents or parents advice, trust me they may sound mad but they make more sense and will always be looking out for you.

 

Contracts

Business contracts are used to memorialize important agreements you (or your business) enter into with others. So what’s an “important” agreement? Any agreement on which you are relying and that can affect the future of your business or your life.

Sure, small business and friends operate all the time on informal understandings that they may never write downor even completely verbalize to the other party. But it’s often worthwhile for you to take the time to draw up a formal contract. Contracts allow the parties the opportunity to

  • Clearly define their obligations to and expectations of each other
  • Limit their liability
  • Lay out payment terms
  • Divide up risks
  • Make sure each side understands its responsibilities
Here’s a quick rule: If you’ve spent more than five minutes worrying about whether you need a contract, guess what? You probably do.

So, what makes a contract a contract? A valid contract typically requires the following four elements:

  • A meeting of the minds between the parties demonstrating they both understand and agree to the essentials of the deal
  • Consideration (something of value exchanged by each of the parties, such as cash, goods, or a promise to do something)
  • An agreement to enter into the contract (typically evidenced by both parties signing a written contract, although oral contracts can be valid, too, in some situations)
  • The legal competence of each party, meaning the parties are not minors and are of sound mind

Meeting of the minds

The first step in creating a contract is making sure that both parties are talking about the same deal, so that when they subsequently agree to enter into the contract they are both agreeing to the same thing. Seems obvious, right? Until you realize that the “vintage red car” you planned on buying from your brother-in-law isn’t the Ferrari, it’s his Beetle. Take the time to communicate your understanding of the deal to the other party, and listen carefully when he or she talks back.

Consideration

After the parties reach a meeting of the minds regarding the deal, they must both exchange something of value in order to create a contract. Often, one party provides its goods or services in exchange for the cash of the other party. But consideration can take many other forms, as long as each party is giving up something of value to it to convince the other party to enter into the contract.

You can read law treatises defining consideration until the cows come home, but in the real world your biggest issues related to consideration are how much and when.

If cash is exchanging hands in your contract, think through any assumptions you are making about the way payment will be made.

  • If you expect to be paid at the time the contract is signed, say so.
  • If one of the parties will be paying after the contract is signed, say whether the payment will be in cash, by check, by cashier’s check, or by wire transfer. Be explicit about the way the money will change hands. For example, you likely want a cashier’s check if you’re turning over title to a car or other significant assets.
  • If payments will be made over time or based on external factors, such as the amount of business done or a home bought, you may need to define the payment schedule by using a formula over a long term, calculating cost, repayment and interest. Keep the formula simple and feel free to put examples of how the formula works right in the body of the contract. (eg. Homeloan R3500 x 240 months, bare in mind interest rate increase.)
  • If you have to use a complex royalty or other payment formula, test the formula with the other side to be sure you both understand it.
Be wary of gift contracts, where someone gets something for nothing. If the value one party is receiving is truly free, so that only the other side is giving up something of value, then the parties probably haven’t formed a contract. You usually can’t make someone give you a true gift, no matter how many times the giver promised to do so.

Agreement to enter into the contract

After both parties understand the deal and understand what type of consideration will be exchanged by each party, they are ready to form an agreement. Usually, the parties demonstrate that negotiations have ended and an agreement has been reached when the parties sign the contract, unless it is an oral agreement.

In business as in opera, it’s not over until the fat lady sings — er, signs. It’s fine, within reason, to negotiate changes in a written contract up until the moment you sign it.

Legal competence

Be sure that the party you’re working with is legally competent to explain all legal mumbo jumbo correctly. Otherwise, your signed contract may be a lifetime commitment you never understood. Even if the other guy wears a lampshade on his head, he may be legally competent. But watch out for the following situations:

  • Minors cannot enter into contracts without the additionalsignature of their parents or guardians. In most our country, a minor is a person under the age of 18.
  • Persons lacking sound mind usually cannot enter into contracts because, the reasoning goes, they lack the ability to understand what they are doing and to create a “meeting of the minds.” Persons lacking sound mind generally are those who are mentally handicapped or impaired by the use of drugs or alcohol to such an extent that they cannot understand the significance of their acts. So try not to do deals at your local watering hole late into Labour day.
  • Persons who lack authority to act on behalf of someone else may not be able to legally bind that other person or company. So make sure that the person signing on behalf of a company or other person has the legal authority to do so.

 

Overview of the:

CONSUMER PROTECTION ACT

Overview of the main features of the Act

Background
The Act sets out the minimum requirements to ensure adequate consumer protection in South Africa.

This Act constitutes an overarching framework for consumer protection, and all other laws which provide for consumer protection (usually within a particular sector) will need to be read with this Act to ensure a common standard of protection.

All suppliers of goods and services will need to take note of the new measures and ensure that they are able to comply once the Act becomes effective. It is foreseen that the Act will become effective towards the end of 2010.

Application of the Act
The Consumer Protection Act affects a wide range of consumers and transactions. The definition of a “consumer” includes not only the person (either a natural or juristic person) to whom goods or services are promoted or supplied, but also the actual user of the goods or the recipients or beneficiary of the services. In other words, a consumer may be a person other than the person who entered into an agreement with a supplier and paid for the goods or services. In practice this would mean that if you are given a spa treatment as a birthday present, you will be entitled to the consumer protection measures set out in the Act, even though you never entered into an agreement with the spa.

With regard to juristic persons, the Act will only provide protection to small businesses (in other words, where the consumer is a juristic persons with an asset value or annual turnover below a threshold determined by the Minister). This approach is in line with the approach in the National Credit Act. In terms of the National Credit Act the threshold is set at R1000 000. However, we’ll have to wait and see exactly what the threshold will be for purposes of the Consumer Protection Act.

In terms of section five of the Act, certain transactions will be excluded from the application of the Act. Exempted transactions include those where:

  • goods or services are supplied to the State (transactions where the State will be the consumer); or
  • where the transaction constitutes a credit agreement under the National Credit Act (the goods or services that are the subject of the credit agreement are not excluded from the ambit of the Act); or
  • a transaction pertaining to services under an employment contract; or
  • a transaction which gives effect to a collective bargaining agreement within the meaning of section 23 of the Constitution and the Labour Relations Act.

The Act further provides for a mechanism in terms of which a regulatory authority may apply to the Minister of Trade and Industry (the Minister) for an industry wide exemption from certain provisions of the Act. The application for such an exemption must be based on the fact that there is an overlap between the provisions of the Act and the regulatory scheme administered by the relevant regulatory authority. The Minister may only grant an exemption if the applicable regulatory scheme provides better, or at least similar, consumer protection than the protection provided for in the Act.

The provisions in the Act regarding safety monitoring and recall (section 60), and liability for damages caused by goods (section 61) apply to ALL transactions, even those transactions exempted from the application of the Act. Thus, in our example above, the distributor will be entitled to protection where she suffered damage as a result of defective goods – even where the transaction was exempted.

The Act will not apply to services which constitute advice or an intermediary service that is subject to regulation in terms of the Financial Advisory and Intermediary Services Act, 2002 (FAIS), or services in terms of the Long-term Insurance Act, 1998 or the Short-term Insurance Act, 1998. However, it should be noted that the Act prescribes that the Long-term Insurance Act and the Short-term Insurance Act must be aligned with the consumer protection measures in this Act within 18 months from the commencement of this Act. If this is not done, the provisions of this Act will apply to all services rendered in terms of the two insurance Acts.

Threshold
The Act will not apply to transactions where the consumer is a juristic person with an asset value or annual turnover of more than a threshold value determined by the Minister (section 6).

Direct marketing
The provisions in the Act which regulate direct marketing extend to all communication for the purposes of direct marketing (not only direct marketing via electronic communication). In terms of section 11, a consumer may either refuse to accept, pre-emptively block, or require another person to discontinue any communication which may be seen as direct marketing. This may include telephone calls, e-mails, brochures or letters in the mail, etc. The National Consumer Commission will facilitate the establishment of a registry where a consumer may register their particular preferences (for example, that a consumer wishes not to receive any direct marketing (a pre-emptive block) or, where he previously agreed to receive marketing material, he now wishes to change his mind and requires the marketer to stop marketing to him directly). Businesses will have to ensure that they have measures in place to receive and record consumers’ specific preferences (at no cost to the consumer), and abide by these expressed preferences. In addition, the Minister may prescribe certain times when consumers may not be contacted, for example, on public holidays or after a certain time at night.

Cooling off
The Act provides for a 5 business day cooling off period in instances where transactions resulted from direct marketing, in other words, transactions which were not initiated by the consumer (section 16). The five business day period will commence on the latter of the day on which the transaction or agreement was concluded, or the day on which the goods or services were delivered to the consumer. This section does not apply to transactions which are governed by section 44 of the Electronic Communications and Transactions Act, 2002 (in terms of which consumers have a seven day cooling off period (normal days, not business days)).

The Act provides for a number of defences which the producer, importer, distributor and retailer may use when a claim for damages is instituted against them by a consumer.

It should be noted that it is not a requirement for the transaction to be concluded at the home of the consumer for the cooling off period to apply (as is the case in the National Credit Act). The cooling off period will apply to all transactions that resulted from direct marketing.

Product liability
Section 61 of the Act effects a major change with regard to the position of the consumer in cases where he suffers damages as a result of unsafe or defective goods. This provision determines that producers, importers, distributors and retailers of goods will be liable for any harm caused as a result of the supply of unsafe goods, a product failure, a defect or hazard in the product, or interestingly, inadequate instructions for the use of the goods or warnings related to any possible hazard that might be associated with the product. (Although the Act determines that labelling of products and trade descriptions are optional, it might be necessary for producers, importers, distributors and retailers of goods to ensure that proper instructions for use, and warnings of potential danger or hazard are provided, as this may prevent a claim for damages by consumers.)

Probably the biggest change to the current legal position is the fact that the Act determines that producers, importers, distributors and retailers of goods will be liable for damage caused by unsafe or defective goods whether or not the harm resulted from their negligence. This means that the consumer will no longer have to prove that the damages suffered as a result of defected goods was due to the fault (negligence or otherwise) of the producer, importer, distributor or retailer (this is referred to as strict liability). Rather, the shoe is now on the other foot: where a consumer claims for damages, the producer, importer, distributor or retailer will have to prove that they are not responsible, and thus not accountable, for the resulting damages.

The Act determines that a consumer may hold the producer, importer, distributor and retailer jointly or severally liable, and a consumer may claim for  damages related to death, injury, illness, loss or damage to property, or economic loss as a result of death, injury, illness or, loss or damage to property. The Act provides for a number of defences which the producer, importer, distributor and retailer may use when a claim for damages is instituted against them by a consumer.

Term, renewal and cancellation of contracts
The Act regulates the term, renewal and cancellation of fixed term contracts. In terms of section 14, there can be no automatic renewal of the fixed term contract. The consumer (this section applies to natural persons only) is entitled to cancel the contract when the contract term expires, or at any other time, given that he gave the supplier 20 business days notice in writing. Where the consumer cancels the contract before the expiry date, the supplier will be entitled to any outstanding amounts, as well as a reasonable cancellation fee.

At the expiry of the term of a fixed term agreement, the contract will automatically continue on a month to month basis, until the consumer either cancels the contract or renews the agreement for another fixed term. The Act requires the supplier to remind the consumer of the expiry date at least forty business days prior to the expiry date of the fixed term. The Act also allows the Minister to prescribe the maximum duration of fixed terms agreements in general or for specific categories of agreements.

Language
The Act does not contain a provision for information to be in an official language. However, section 22 requires that all information should be in plain language. The Act further requires that the language used should be appropriate to the class of persons the goods or services are aimed at, and as understandable to someone of that class with average literacy skills and experience. Where technical specifications are set out in any agreement or on a product label, this requirement might prove difficult to comply with.

Written agreements
There is no general requirement for agreements to be in writing. However, the Act allows the Minister to require certain categories of agreements to be in writing. It is foreseen that the Minister may require fixed term contracts to be in writing. Section 50 requires that where an agreement is set out in writing (whether this is required in terms of this Act or voluntary) the supplier must provide the consumer with one free copy (or access to an electronic copy) of the terms and conditions, that the agreement must be in plain and understandable language, and that it should contain a breakdown of the consumer’s financial obligations under the agreement. However, if a consumer agreement between a supplier and a consumer is not in writing, the supplier is obliged to keep a record of the transactions entered into over the telephone or any other recordable form.

Customer loyalty programmes
Section 35 of the Act determines that a supplier who sponsors a consumer loyalty programme, or accepts loyalty credits in exchange for goods or services (for example frequent flyer miles), may impose a partial or complete restriction on the availability of the goods or services during specific periods of the year. However, the restriction may not exceed 90 days in a calendar year. In addition, the Act requires that certain information be made available to the consumer when an offer to participate in the loyalty programme is made.

The information should include the nature of the programme, the goods or services to which it applies, the steps required to receive benefits, and the time, venue and persons from which consumers may obtain access to either the programme or benefits in terms of the programme. This means that a supplier that has a loyalty programme, such as an airline, may restrict the use of frequent flyer miles during certain periods of the year (not exceeding 90 days). However, at any other time of the year, the airline must accept loyalty credits in return for a service as if the consumer offered any other form of consideration (such as cash). The supplier may not benefit consumers who offer to pay cash over consumers who use loyalty credits.

The Act provides for possible defences that a supplier may use when a consumer alleges that the supplier did not have sufficient goods or services available in return for loyalty credits. In essence, it will be a defence where the supplier offers to supply comparable goods or services to the consumer, and the consumer either accepts the offer, or unreasonably refuses the offer.

Overselling and overbooking
The Act provides for the reasonableness test for overselling and overbooking. In terms of this test a supplier may not accept payment for goods or services where it has no reasonable intention to supply the goods or services, or where it intends to supply goods or services that are materially different to the goods or services for which the consumer has paid.

With regard to damages suffered as a result of a supplier’s inability to supply goods or services due to overbooking or overselling the Act provides for a refund of the amount paid plus interest (usually, this would be the deposit plus interest), as well as any consequential damages which directly resulted from the breach of contract.

In practical terms, this would mean that where you –

  • booked a flight from Cape Town to Durban for which you paid a deposit of RX,
  • booked and paid for a rental car in Durban in the amount of RY, and
  • set up a meeting with a business associate in Durban to sign a contract valued at RZ, after which the business associate will leave for India, and you are bumped from the flight as a result of overbooking, you will be entitled to claim
  • RX plus interest for the deposit you paid for the flight, and
  • RY plus interest for the rental car, which amounts to a consequential loss that is directly resulting from the overbooking.

However, the fact that you suffered a loss because you were not able to sign the contract before your business associate left for India amounts to loss of anticipated use or enjoyment, for which the Act does not provide.

Implied warranty of quality
The Act provides for an implied warranty of quality. In terms of this warranty the producer or importer, the distributor and the retailer each warrant that the goods comply with the requirements and standards contemplated in the Act. However, the implied warranty will not apply where goods have been altered contrary to the instructions of the producer, importer, distributor or the retailer, or altered after leaving the control of the producer, importer, distributor or the retailer.

Failed, unsafe or defective goods may be returned to the supplier within six months after the delivery of the goods to a consumer. In such a case the supplier has to either repair or replace the goods, or refund to the consumer the price paid by the consumer. It is important to remember that the Act allows the consumer to choose whether to be refunded, or to have the goods replaced or repaired.

In instances where the supplier repairs the failed or defective goods (or any component of the goods) and within three months after that repair, the failure or defect was not fixed and it recurs, or another failure or defect is discovered, the supplier must replace the goods, or refund the price to the consumer. It should be kept in mind that the Act specifically determines that an implied warranty, as provided for in the Act, is in addition to any other implied warranty or condition imposed by the common law, any other legislation, and any express warranty or condition stipulated by the producer or importer, distributor or retailer.

Warranty on repaired goods
The Act provides for a three month warranty on repaired goods. This warranty includes all new or reconditioned parts installed during the repair or maintenance work, as well as the labour to install such parts. However, where a consumer subjected goods to abuse or misuse, the warranty will be void. Also, the warranty does not extend to ordinary wear and tear.

Safety monitoring and recall
The Act introduces a streamlined approach to safety monitoring in that it obliges the National Consumer Commission to promote the development and adoption of industry wide codes of practice in terms of which industries will monitor safety of their products. This includes the introduction of systems to receive and investigate complaints, recall goods, and reporting on certain matters to the National Consumer Commission.

However, the National Consumer Commission may require the importer or producer of particular goods to carry out a recall of the product where the National Consumer Commission has reasonable grounds to believe that goods are unsafe, and the producer or importer of the goods has not taken the necessary steps in terms of the applicable industry code to ensure public safety.

Prepaid certificates, credits and vouchers
The Act determines that gift or similar vouchers expire either upon redemption or after three years.

Industry codes
The Act provides for procedures to be followed before the Minister approves and publishes an industry code in the Government gazette. The Act requires the National Consumer Commission to consult the public and relevant stakeholders before it recommends a proposed industry code to the Minister for his approval. In turn, the Minister is provided with the authority to prescribe, approve or withdraw a previously approved industry code. The Minister may withdraw an industry code on the recommendation of the Commission, who has the authority to review the effectiveness of a code at intervals of five years.

Also, where an industry code provides for an alternative dispute resolution scheme, the Act allows the Minister to accredit such a scheme as an “ombud with jurisdiction”. This means that the scheme will be officially recognised in the whole scheme of redress as provided for in the Act. For example, where a consumer has a dispute with a supplier within the particular industry, the consumer may lodge a complaint with the industry ombud, before he approaches the National Consumer Commission for assistance.

 

 

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One response to “Mitchell’s Plain Money $$$

  1. Anonymous

    March 2, 2017 at 12:42 AM

    Nice Article!

     

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