THE CONSUMER PROTECTION ACT THE 50 SHADES OF GREY RELATIVE TO INSURANCE Liesl Fourie 26 June 2014
Content of Discussion General principles • Transactions excluded from application of the CPA • Consumer rights • Disclaimers and exemption clauses • − General principles applicable to disclaimers and exemption clauses − Voetstoots clauses Product liability •
General Principles A “Consumer” is:- • − any natural person or small juristic person (asset value/annual turnover less than R2mil) − goods/services are marketed to, or who buys − in ordinary course of business − including a user/beneficiary
General Principles Cont. “Supplier” means:- • − any person who markets/sells goods/services in the ordinary course of business “Business” means:- • − the continual marketing of any goods or services
General Principles Cont. “Goods” means:- • – anything marketed for human consumption – any other tangible object including any medium on which anything is or may be written or encoded – any literature, music, photographs, software, code written or encoded on any medium or licence to use any such product – a legal interest in land or any other immovable property – gas, water and electricity
General Principles Cont. “Services” include, but is not limited to:- • − any work performed by one person for direct or indirect benefit of another – the provision of education, information, advice or consultation – banking or related/similar services, underwriting or assumption of any risk by one person on behalf of another – transportation of an individual or goods – the provision of accommodation, sustenance, entertainment, access to electronic communication infrastructure, use of premises in respect of rental, access to an event or a facility, premises or activity Examples •
Transactions Excluded The following transactions are excluded from the CPA:- • − goods and services supplied to the State − large business (> R2mil) − credit agreements (NCA) − employment services − collective bargaining agreements − as determined by the Minister
Consumer Rights Consumers have the following rights:- • − Right to equality − Right to privacy − Right to choose − Right to disclosure − Right to fair and reasonable marketing − Right to fair and honest dealing − Right to fair, just and reasonable terms − Right to fair value, good quality and safety
Disclaimers Section 49(1) - any notice to consumers which purports • to:- - limit the risk or liability of the supplier or any other person - constitutes the assumption of risk or liability by the consumer - imposes an obligation on the consumer to indemnify the supplier or any other person for any cause - be an acknowledgement of any fact by the consumer must be drawn to the attention of the consumer in a manner an form that satisfies the formal requirements of the CPA
Disclaimers Cont. Section 49(2) a notice concerning any activity of facility that is • subject to any risk:- − of an unusual character or nature − the presence of which the consumer could not reasonably be expected to be aware of or notice − that could result in serious injury or death the supplier must specifically draw the fact, nature and the • potential effect of that risk to the attention of the consumer the consumer must have consented to that by signing or • initialling the provision or otherwise acting in a manner consistent with acknowledgment of the notice, awareness of the risk and acceptance of the provision
Disclaimers Cont. Section 49(3) - notices must be written in plain language • Section 49(4) - the fact, nature and effect of the provision • or notice must be drawn to the attention of the consumer:- − in a conspicuous manner and form that is likely to attract the attention of an ordinarily alert consumer having regard to the circumstances − at the time at which the consumer enters into the transaction, begins to engage in the activity or enters or gains access to the facility or is required or expected to offer consideration for the transaction or agreement
Exemption Clauses What is an exemption clause? • − contractual terms that exclude, alter or limit the liability that normally flows from contractual relations − usually exclude the liability of the supplier for loss of resulting from defective performance − normally found in standard form contracts
Exemption Clauses Cont. Section 48 – a supplier MUST NOT offer to supply • goods/services on terms that are unreasonable, unfair or unjust CPA guidelines:- • − terms that are excessively one-sided in favour of supplier − terms so adverse to the consumer that they are inequitable − if consumer relied on false or misleading representation − if the fact, nature and effect of the term was not drawn to the consumer’s attention in a manner that is conspicuous and a manner that is likely to draw attention of ordinary alert consumer − terms to be in plain language
Exemptions Cont. Section 51 - prohibits the supplier from making an • agreement subject to any term and condition if:- − its general purpose or effect is to defeat the purposes of the CPA − it directly or indirectly purports to waive or deprive a consumer of the right in terms of the CPA, avoid a supplier’s obligation or duty in terms of the CPA − it purports to limit or exempt the supplier from liability for any loss directly or indirectly attributable to the gross negligence of the supplier or any person acting for or control by the supplier
Exemptions Cont. Exemption of liability for loss or damage due to gross • negligence will no longer be permitted Prohibited terms are void and thus unenforceable • Continue to display disclaimers and include exemption • clauses in agreements. The concept gross negligence is not defined in the CPA, it is not clear when conduct will be found to be grossly negligent and when an action will constitutes only normal negligence
Voetstoots Clauses Goods are sold “as is” • The seller does not take the risk of the presence of any • diseases or defects but is liable for misrepresentations of any kind There is no general duty in the common law on the seller to • disclose Where the seller intentionally conceal a defect, he will be • guilty of misrepresentation and the purchaser may institute a damages claim. This is also the case where the purpose of the concealment was to mislead
Voetstoots Cont. Will the Voetstoots clause survive the CPA? • Section 51 • The implied warranty of quality provided by the CPA is an • addition to any other warranty in terms of the common law Selling goods in terms of a general umbrella voetstoots • clause is a clear waiver and deprivation of consumer’s rights
Voetstoots Cont. Nothing prevents a supplier from selling goods in a • particular condition, provided: – − the consumer is informed of the state of the goods e.g. that goods are second hand or describing the quality of goods as well as the defects in detail − the consumer accepted the goods on that basis Possible loophole for suppliers:- • − to argue that even though the consumer did not expressly accept the goods in that particular condition, they acted in a way compatible with accepting the goods in that condition
Product Liability Section 61 (1) - the producer or importer, distributor or • retailer of any goods is liable for any harm caused wholly or partly as a consequence of:- − the supply of unsafe goods − a product failure, defect or hazard in any goods − inadequate instructions or warnings provided pertaining to any hazard arising from or associated with the use of any goods
Product Liability Cont. Section 53 defines "defect" as:- • − any material imperfection in the manufacture of the goods or the components or the performance of the service that renders the goods or results of the service less acceptable than persons generally would be reasonably entitled to expect in the circumstances − any characteristic of the goods or components that renders the goods less useful, practicable or safe than persons generally would be reasonably entitled to expect in the circumstances
Product Liability Cont. Concept of "harm" is wide, it includes:- • − death or injury to natural person − illness − loss or physical damage to property (movable and immovable) − any economic loss suffered from harm as contemplated
Product Liability Cont. Sec 61(2) - extends liability to the supplier of services who • applies, supplies, installs or provide access to goods Liability between parties in supply chain is joint and several • No negligence is required on the part of any of the • parties in the supply chain Consumer still has to prove a causal relationship between • the defect and the loss suffered but no longer necessary to prove that the manufacturer was negligent in causing the defect
Product Liability Cont. Liability may be strict but is not absolute • Court still has the discretion to determine:- • − causality (whether harm was suffered as a direct result of the use of the goods/service) − mitigation of loss − the extent of monetary value of economic loss − and make a finding of contributory negligence
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