04 Oct 2010

No More Lock-In To Contracts

Consumer Protection Act (CPA) 1 Comment

Adv Randolph Samuel @ Lucid Living

You would be hard pressed to find a friend or family member who has not felt the effects of this global recession. Economic growth has plummeted worldwide and as a result, millions of people have lost their jobs, homes and even hope.

As we wait, anxiously, for the economic tide to turn, we slash household expenses, cutting out the non-essentials so that we can weather the storm.

After rigorous deliberation with your family you arrive at consensus on what luxuries have to be sacrificed. With firm resolve, you attempt to cancel your internet, DSTV and gym contracts. You are advised that these contracts are for a “fixed-term” and cannot be cancelled. “That’s impossible,” you contest. “It clearly states so, in your contract sir,” replies the calm and polite respondent. Your anger turns to a plea for empathy, “I just can’t afford it anymore, don’t you understand?” “I do understand sir, but you agreed to these terms,” replies the emotionally detached voice.

You are left in a precarious position. You know you can no longer afford these subscriptions, but you are being forced to keep them. You know that this will result in you defaulting on payment and the creditors taking legal action, but there is nothing you can do to stop it.

Section 14 of the Consumer Protection Act (“the Act”) will provide you (“the consumer”) with a reprieve in these circumstances and brings about some fundamental changes to the operation of fixed-term contracts, specifically with regard to their expiry and renewal.

In terms of section 14, a consumer may cancel a fixed-term contract in two instances:

 Upon expiration of the fixed-term (without penalty or charge); or

 At any other time (provided that the consumer gives the supplier twenty (20) business day’s notice of his intention to do so).

Where the consumer cancels the contract upon expiration of the fixed-term, he remains liable to the supplier for any outstanding amounts owed in terms of the contract up to the date of cancellation. If monthly subscriptions are paid in arrears, the consumer will be liable for the last month’s subscription (including any additional charges incurred) only and no penalty whatsoever.

Where the consumer cancels the fixed-term contract before its expiration date, the supplier will be entitled to impose a reasonable cancellation fee. At this stage it is not apparent how the cancellation penalty will be calculated and whether it would enable the supplier to claim an amount equal to the aggregate outstanding subscription fees, calculated in respect of the remaining term of the contract.

The Act places an onus on the supplier to notify (in writing or other recordable form) the consumer of an impending expiry of a fixed-term contract on no less than forty (40) business days before its expiration. The aforementioned notice must also advise the consumer of:

 Any material changes to the contract if it is to be renewed or may continue beyond the expiry date;

 Whether the contract will automatically continue on a month to month basis, after the expiry date; and

 The consumer’s right to terminate the contract on the expiry date.

Should the consumer fail to inform the supplier upon termination of the contract of his intention to cancel the contract, the contract shall automatically be renewed on a month to month basis.

Section 14 prevents suppliers from dictating inflexible and onerous commercial terms. It puts the freedom of choice, back into the consumer’s hands.

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One Response to “No More Lock-In To Contracts”

  1. Anissa Sesley says:

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