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Impact of CPA - 1

30 September 2010

1. COMMENCEMENT OF THE ACT
The Date of Commencement of the Consumer Protection Act 68 of 2008 ("the CPA") (which was assented to on 24 April 2009) will (unless otherwise indicated) be 24 October 2010. [This has been postponed to 1 April 2011 - Ed. See dti Media Release]

The CPA will necessitate certain amendments to the 'standard' offers to purchase and agreements of sale of immovable property at present in use.

2. PROVISIONS OF ACT THAT AFFECT SALES OF IMMOVABLE PROPERTY
I have in this clause 2 quoted all the sections of the CPA which I think could affect sale agreements of immovable property. I have also included the section that deals with auctions as it affects the terms and conditions that need to be contained in 'conditions of sale' pertaining to sales by way of public auction. I have in bold and in square brackets added my comments.

Chapter 1 Definitions
In this Act-
'agreement' means an arrangement or understanding between or among two or more parties that purports to establish a relationship in law between or among them; [Note the difference between 'agreement', 'consumer agreement' and 'transaction' as defined]

'business' means the continual marketing of any goods or services;

'clearly', in relation to the quality of any text, notice or visual representation to be produced, published or displayed to a consumer, means in a form that satisfies the requirements of section 22;

'consumer', in respect of any particular goods or services, means-
(a) a person to whom those particular goods or services are marketed in the ordinary course of the supplier's business;
(b) a person who has entered into a transaction with a supplier in the ordinary course of the supplier's business, unless the transaction is exempt from the application of this Act by section 5 (2) or in terms of section 5 (3);
[It is important to note that regarding ordinary sale e.g. an agreement where a person sells his dwelling house the buyer would not be a 'consumer' as the sale would not be by a 'supplier' as defined nor would the sale be in the 'ordinary course of the seller's business']

'consumer agreement' means an agreement between a supplier and a consumer other than a franchise agreement; [Note that a sale agreement of immovable property is only a 'consumer agreement' if the seller is a 'supplier' and the purchaser a 'consumer']

'goods' includes-
(a) anything marketed for human consumption;
(b) any tangible object not otherwise contemplated in paragraph (a), including any medium on which anything is or may be written or encoded;
(d) a legal interest [which would include 'ownership'] in land or any other immovable property, other than an interest that falls within the definition of 'service' in this section; and [a sale of immovable property is, therefore, a sale of 'goods' as defined]

'intermediary' means a person who, in the ordinary course of business and for remuneration or gain, engages in the business of-
(a) representing another person with respect to the actual or potential supply of any goods or services;
(c) offering to sell to a consumer, soliciting offers for or selling to a consumer any goods or property that belongs to a third person, or service to be supplied by a third person,
but does not include a person whose activities as an intermediary are regulated in terms of any other national legislation; [as the activities of estate agents are regulated by the Estate Agency Affairs Act 112 of 1976 it would appear as if an estate agent would not be an 'intermediary' as defined]; [as the activities of executors are regulated by the Administration of Estates Act 66 of 1965 it would appear as if an executor of a deceased estate would not be an 'intermediary' as defined]

'juristic person' includes-
(a) a body corporate;
(b) a partnership or association; or
(c) a trust as defined in the Trust Property [Control] Act, 1988 (Act 57 of 1988); [note this provision]

'market', when used as a verb, means to promote or supply any goods or services;

'person' includes a juristic person;

'producer', with respect to any particular goods, means a person who-
(a) grows, nurtures, harvests, mines, generates, refines, creates, manufactures or otherwise produces the goods within the Republic, or causes any of those things to be done, with the intention of making them available for supply in the ordinary course of business; [a property developer who develops with the intention to sell the buildings built would be a 'producer' as defined] or

'retailer', with respect to any particular goods, means a person who, in the ordinary course of business, supplies those goods to a consumer; [a property developer who develops with the intention to sell the buildings built would be a 'retailer' as defined]

'supplier' means a person who markets [in other words:" promote or supply any goods" (see 2.1.9)] any goods or services [in other words "sell, rent, exchange and hire in the ordinary course of business for consideration (see 2.1.14)"]; [note that if the definition of 'supplier is read with the definition of 'market' and 'supply' it would appear as if a seller of immovable property is only a 'supplier' as defined if he sells the immovable property in the ordinary course of business for consideration]

'supply', when used as a verb-
(a) in relation to goods, includes sell, rent, exchange and hire in the ordinary course of business for consideration

'transaction' means-
(a) in respect of a person acting in the ordinary course of business-
(i) an agreement between or among that person and one or more other persons for the supply [in other words "sell, rent, exchange or hire in the ordinary course of business of the other person(s) for consideration"] or potential supply of any goods or services in exchange for consideration; or
(ii) the supply [in other words "sell, rent, exchange and hire in the ordinary course of business for consideration"] by that person of any goods to or at the direction of a consumer for consideration [note that a sale of immovable property is only a 'transaction' as defined if it is between a seller acting in the ordinary course of business]

Section 5 Application of Act
(1) This Act applies to-
(a) every transaction occurring within the Republic, unless it is exempted by subsection (2), or in terms of subsections (3) and (4);
(b) the promotion of any goods or services, or of the supplier (sic) [I suppose the word 'supplier' should have read 'supply']of any goods or services, within the Republic, unless-
(i) those goods or services could not reasonably be the subject of a transaction to which this Act applies in terms of paragraph (a); or
(ii) the promotion of those goods or services has been exempted in terms of subsections (3) and (4);
(c) goods or services that are supplied or performed in terms of a transaction to which this Act applies, irrespective of whether any of those goods or services are offered or supplied in conjunction with any other goods or services, or separate from any other goods or services; and
(d) goods that are supplied in terms of a transaction that is exempt from the application of this Act, but only to the extent provided for in subsection (5).

[Note that the act applies only to a 'transaction' as defined and accordingly, if the immovable property is not sold by the seller in the ordinary course of business for consideration, the sale agreement would not constitute a 'transaction' and the CPA would not apply]

(2) This Act does not apply to any transaction-
(a) in terms of which goods or services are promoted or supplied to the State;
(b) in terms of which the consumer is a juristic person whose asset value or annual turnover, at the time of the transaction, equals or exceeds the threshold value determined by the Minister in terms of section 6; [note this exemption]
(c) if the transaction falls within an exemption granted by the Minister in terms of subsections (3) and (4);
(d) that constitutes a credit agreement under the National Credit Act, but the goods or services that are the subject of the credit agreement are not excluded from the ambit of this Act;

Section 18 Consumer's right to choose or examine goods
(2) If any goods are displayed in or sold from open stock, the consumer has the right to select or reject any particular item from that stock before completing the transaction.

(3) If the consumer has agreed to purchase goods solely on the basis of a description or sample, or both, provided by the supplier, the goods delivered to the consumer must in all material respects and characteristics correspond to that which an ordinary alert consumer would have been entitled to expect based on the description or on a reasonable examination of the sample, as the case may be. [this means that a developer of a sectional title complex where a 'show unit' is built will be obliged to ensure that all the units in all material respects and characteristics correspond to the show unit]

(4) If a supply of goods is by sample, as well as by description, it is not sufficient that any of the goods correspond with the sample if the goods do not also correspond with the description.

Section 19 Consumer's rights with respect to delivery of goods or supply of service:
(2) Unless otherwise expressly provided or anticipated in an agreement, it is an implied condition of every transaction for the supply of goods or services that-

(a) the supplier is responsible to deliver [it is trite law that 'delivery' of immovable property takes place by registration of transfer see Legator Mckenna Inc and another v Shea and others 2010 (1) SA 35 (SCA) "delivery - which in the case of immovable property is effected by registration of transfer in the deeds office"] the goods or perform the services-

(i) on the agreed date and at the agreed time, if any, or otherwise within a reasonable time after concluding the transaction or agreement;
(ii) at the agreed place of delivery or performance; and
(iii) at the cost of the supplier, in the case of delivery of goods; or [if the agreement of sale does not provide that the purchaser will pay the transfer costs the seller would have to pay those costs]
(c) goods to be delivered remain at the supplier's risk until the consumer has accepted delivery of them, in accordance with this section.

(3) If an agreement does not provide a specific date or time for delivery of any goods or performance of any services, the supplier must not require that the consumer accept delivery or performance of the services at an unreasonable time.

(4) The consumer is regarded to have accepted delivery of any goods on the earliest of the following circumstances:
(a) When the consumer expressly or implicitly communicates to the supplier that the consumer has accepted delivery of such goods; or
(b) when the goods have been delivered to the consumer, and-
(i) the consumer does anything in relation to the goods that would be inconsistent with the supplier's ownership of them; or
(ii) after the lapse of a reasonable time, the consumer retains the goods without intimating to the supplier that the consumer has rejected delivery of them, subject to subsection (5).

(5) When a supplier tenders delivery to a consumer of any goods, the supplier must, on request, allow the consumer a reasonable opportunity to examine those goods for the purpose of ascertaining whether the consumer is satisfied that the goods-
(a) are of a type and quality reasonably contemplated in the agreement, and meet the tests set out in section 18 (3) and (4); and
(b) in the case of a special-order agreement, reasonably conform to the material specifications of the special order. [it would appear as if this provision would apply where a purchaser buys 'off plan']

(6) If the supplier tenders the delivery of goods or the performance of any services at a location, on a date or at a time other than as agreed with the consumer, the consumer may either-
(a) accept the delivery or performance at that location, date and time;
(b) require the delivery or performance at the agreed location, date and time, if that date and time have not yet passed; or
(c) cancel the agreement without penalty, treating any delivered goods or performed services as unsolicited goods or services in accordance with section 21. [this provision could have disastrous results for a developer who undertakes in the sale agreement of a building to be built to effect registration of transfer before a specified date]

Section 20 Consumer's right to return goods
(1) This section is in addition to and not in substitution for-
(a) the right to return unsafe or defective goods, contemplated in section 56; or
(b) any other right in law between a supplier and consumer to return goods and receive a refund.

(2) Subject to subsections (3) to (6), the consumer may return goods to the supplier, and receive a full refund of any consideration paid for those goods, if the supplier has delivered-
(b) goods that the consumer did not have an opportunity to examine before delivery, and the consumer has rejected delivery of those goods for any of the reasons contemplated in section 19 (5); [this provision is relevant where a building to be built is sold]
(d) goods intended to satisfy a particular purpose communicated to the supplier as contemplated in section 55 (3), and within 10 business days after delivery to the consumer, the goods have been found to be unsuitable for that particular purpose.

(4) Goods returnable in terms of-
(b) subsection (2) (b) to (d) must be returned to the supplier at the supplier's risk and expense, [this means that the developer would have to pay the transfer duty and transfer costs of the re-transfer] within 10 business days after delivery to the consumer.

Section 22 Right to information in plain and understandable language
(1) The producer of a notice, document or visual representation that is required, in terms of this Act or any other law, to be produced, provided or displayed to a consumer must produce, provide or display that notice, document or visual representation-
(a) in the form prescribed in terms of this Act or any other legislation, if any, for that notice, document or visual representation; or
(b) in plain language, if no form has been prescribed for that notice, document or visual representation.
(2) For the purposes of this Act, a notice, document or visual representation is in plain language if it is reasonable to conclude that an ordinary consumer of the class of persons for whom the notice, document or visual representation is intended, with average literacy skills and minimal experience as a consumer of the relevant goods or services, could be expected to understand the content, significance and import of the notice, document or visual representation without undue effort, having regard to-
(a) the context, comprehensiveness and consistency of the notice, document or visual representation;
(b) the organisation, form and style of the notice, document or visual representation;
(c) the vocabulary, usage and sentence structure of the notice, document or visual representation; and
(d) the use of any illustrations, examples, headings or other aids to reading and understanding.

Section 41 False, misleading or deceptive representations
(1) In relation to the marketing of any goods or services, the supplier must not, by words or conduct-
(a) directly or indirectly express or imply a false, misleading or deceptive representation concerning a material fact to a consumer;
(b) use exaggeration, innuendo or ambiguity as to a material fact, or fail to disclose a material fact if that failure amounts to a deception; or
(c) fail to correct an apparent misapprehension on the part of a consumer, amounting to a false, misleading or deceptive representation,
or permit or require any other person to do so on behalf of the supplier.
(3) Without limiting the generality of subsections (1) and (2), it is a false, misleading or deceptive representation to falsely state or imply, or fail to correct an apparent misapprehension on the part of a consumer to the effect, that-
(c) any land or other immovable property-
(i) has characteristics that it does not have;
(ii) may lawfully be used, or is capable of being used, for a purpose that is in fact unlawful or impracticable; or
(iii) has or is proximate to any facilities, amenities or natural features that it does not have, or that are not available or proximate to it;
(f) a specific price advantage exists;

Section 45 Auctions
(1) In this section, 'auction' includes a sale in execution of or pursuant to a court order, to the extent that the order contemplates that the sale is to be conducted by an auction.
(2) When goods are put up for sale by auction in lots, each lot is, unless there is evidence to the contrary, regarded to be the subject of a separate transaction.
(3) A sale by auction is complete when the auctioneer announces its completion by the fall of the hammer, or in any other customary manner, and until that announcement is made, a bid may be retracted.
(4) Notice must be given in advance that a sale by auction is subject to-
(a) a reserved or upset price; or
(b) a right to bid by or on behalf of the owner or auctioneer, in which case the owner or auctioneer, or any one person on behalf of the owner or auctioneer, as the case may be, may bid at the auction.
(5) Unless notice is given in advance that a sale by auction is subject to a right to bid by or on behalf of the owner or auctioneer-
(a) the owner or auctioneer must not bid or employ any person to bid at the sale;
(b) the auctioneer must not knowingly accept any bid from a person contemplated in paragraph (a); and
(c) the consumer may approach a court to declare the transaction fraudulent, if this subsection has been violated.
(6) The Minister may prescribe requirements to be complied with by an auctioneer, or different categories of auctioneer, in respect of-
(a) the conduct of an auction;
(b) the records to be maintained with respect to property placed for auction; and
(c) the sale of any such property by auction.

Section 48 Unfair, unreasonable or unjust contract terms
(1) A supplier must not-
(a) offer to supply, supply, or enter into an agreement to supply, any goods or services-
(i) at a price that is unfair, unreasonable or unjust; or
(ii) on terms that are unfair, unreasonable or unjust;
(b) market any goods or services, or negotiate, enter into or administer a transaction or an agreement for the supply of any goods or services, in a manner that is unfair, unreasonable or unjust; or
(c) require a consumer, or other person to whom any goods or services are supplied at the direction of the consumer
(i) to waive any rights;
(ii) assume any obligation; or
(iii) waive any liability of the supplier,
on terms that are unfair, unreasonable or unjust, or impose any such terms as a condition of entering into a transaction.
(2) Without limiting the generality of subsection (1), a transaction or agreement, a term or condition of a transaction or agreement, or a notice to which a term or condition is purportedly subject, is unfair, unreasonable or unjust if-
(a) it is excessively one-sided in favour of any person other than the consumer or other person to whom goods or services are to be supplied;
(b) the terms of the transaction or agreement are so adverse to the consumer as to be inequitable;
(c) the consumer relied upon a false, misleading or deceptive representation, as contemplated in section 41 or a statement of opinion provided by or on behalf of the supplier, to the detriment of the consumer; or
(d) the transaction or agreement was subject to a term or condition, or a notice to a consumer contemplated in section 49 (1), and-
(i) the term, condition or notice is unfair, unreasonable, unjust or unconscionable; or
(ii) the fact, nature and effect of that term, condition or notice was not drawn to the attention of the consumer in a manner that satisfied the applicable requirements of section 49.

Roelie Rossouw

Note: Part II will be published on 21 October.

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