Whatever your business, the new Consumer Protection Act will make it necessary to review your contracts

South African companies of all sizes will almost certainly find that they have to redraft many of their contractual documents if they are to avoid running into trouble as a result of the new Consumer Protection Act, says Grant Gunston, Senior Director of Grant Gunston Attorneys.

The new Act has already been passed but should be given a body of regulations shortly. Thereafter, says Gunston, it could go into operation at any stage, “catching some companies totally unprepared”.

“The plain truth,” said Gunston, “is that this is a drastic, almost revolutionary piece of legislation. Traditionally South African contracts have been drafted to protect the suppliers but the Act will now considerably change that situation, in the process making many contracts invalid. It is also likely to ensure that suppliers are a great deal more conscientious about the quality of goods they supply.”

The Act, he added, is designed to protect those with little education, sophistication or commercial experience and/or without the resources to engage legal help from being exploited. It will not apply to consumers who are juristic persons and whose turnover or net asset value exceeds a certain threshold (still to be promulgated), but it will, said Gunston, protect “the little man”, particularly anyone who has signed a contract without fully understanding its conditions and implications.

It will also impose on suppliers the requirement that they back their products with worthwhile guarantees and ensure that their agents do not oversell or cajole clients into buying what they do not need or cannot afford. In addition, said Gunston, the Act will make it easier, over fairly lengthy periods, to replace or obtain refunds for faulty goods.

As indicated, the wording of documents will now become of vital importance.

Gunston said that the Act makes it clear that legal phrases with which lawyers are familiar and comfortable but which are possibly not understood by the general public will have to make way for easily understood terminology written in layman’s language. Furthermore, where there is reason to doubt the consumer’s ability to understand any wording, the supplier or his agents must work through the wording with the consumer virtually line by line to ensure that it is properly understood.

Many legal practices, including his own, said Gunston, are now recommending that an initial review of all documentation be done as soon as possible and that these revised documents then be further reviewed once the regulations have been promulgated.

Unfortunately, added Gunston, manufacturers and suppliers faced with these new challenges and the possibility of increased legal action may have to raise prices to protect themselves and create a buffer reserve.

“Initially, at least, there is likely to be a flurry of consumer actions from people who feel they have been exploited – and, again, lawyers will probably find themselves busy handling a considerable volume of this work. In the long run, however, the Act is likely to be beneficial to all.”

Of particular interest, added Gunston, will be the subjects that are excluded from the Act.

“At present there is a great deal of uncertainty as to where the Act will draw the line. For example, it is possible that long leases would be excluded from the Act because it would be disastrous to landlords if, say, a tenant was able to get out of a five year lease merely because he had subsequently changed his mind.”

Article by: www.grantgunston.co.za