Cancellation of contract in terms of the Consumer Protection Act

The current economic circumstances in South Africa have necessitated both private individuals and businesses alike to review the contracts that they have concluded with the view of limiting any unnecessary expenditure.In most instances contracts do provide for a cancellation clause that regulates the steps that need to be taken by any party to the contract to validly cancel the said contract.

The fact that parties have agreed to a specific cancellation period does not mean that the cancellation periods provided for in legislation are no longer applicable.In this regard it is in the interest of a party that intends to cancel an agreement prior to the expiry of the agreement to establish whether the Consumer Protection Act, 68 of 2008 (hereinafter referred to as “the Act”) is applicable to the agreement that the party wishes to cancel.

Section 14 of the Act as read with Regulation 5 addresses the cancellation of a fixed term contract and what period is regarded as a fixed term contract.

Regulation 5(1)(a) of the Act stipulates that a fixed term contract cannot be concluded for a period exceeding 24 (twenty four) months unless the parties expressly agree to a further extended period and the Supplier is able to show that it would lead to a financial benefit on behalf of the Consumer.  A Consumer can cancel a fixed term contract prior to the expiry date in terms of Section 14(2) of the Act by giving the Supplier 20 (twenty) business days’ notice in writing or in terms of another recorded form as provided for in terms of the Act.

The Consumer would however remain liable for any fees that were in arrears and had already become due and payable towards the service provider prior to the date of cancellation.

Should a Consumer elect to cancel a fixed term contract prior to expiry of the contract, the Supplier is entitled to charge a reasonable cancellation fee.  In terms of Section 14(3)(i) as read with Regulation 5(2) of the Act the following factors need to be taken into consideration to determine a reasonable cancellation fee:

1. The amount in which the Consumer is indebted to the Supplier on date of cancellation.
2. The value of the transaction on the date of cancellation.
3. The value of any goods that will remain in possession of the Consumer on the date of cancellation.
4. The duration of the agreement as initially concluded between the Consumer and the Service Provider.
5. The losses suffered or benefits accrued by the Consumer as a result of the Consumer entering into the Consumer Agreement.
6. The nature of the goods or services that was reserved or booked by the Consumer.
7. The length of the notice or cancellation period provided by the Consumer in relation to the initial expiry date of the agreement.
8. The reasonable potential for the Service Provider, acting diligently, to find an alternative Consumer between the time of receiving the cancellation notice and the time of the cancelled reservation; and
9. The general practice of the relevant industry.

Section 14 of the Act can serve as the necessary tool to a Consumer that wishes to cancel a fixed term contract whether the agreement was concluded in writing or by telephone.

Should you require the services of our office to assess whether you are entitled to cancel a specific agreement in terms of the provisions of the Act as referred to herein or on any other basis you are welcome to contact the following attorneys:

Pieter Walters                                                                                              Nel de Jager

Cell:  0828583817                                                                                          Cell:  0826856212

E-mail:  pieter@nvsinc.co.za                                                                       E-mail:  dejager@nvsinc.co.za

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)