With the commencement of the Consumer Protection Act (CPA) on 1 April 2011 South African consumers have become a highly protected specie with extensive consumer rights and mechanisms implemented by the CPA for protecting the general consumer.

The flip side is that for these rights to be exercised, the supplier of the goods and services to the consumer must ensure the compliance of its business agreements with the requirements of the CPA. This is where we find many suppliers scratching their heads and wondering not only whether their business agreements meet the requirements of the CPA but also whether in achieving compliance, their agreements will still be able to sufficiently protect their business interests and risks.

Simplistically put, the CPA generally applies to any transaction in the ordinary course of business with a consumer, which may be a natural person or a legal entity, where the net asset value or annual turnover of the entity, at the time of the transaction, is less than R2 million per year. This broad application includes many commercial transactions and places a vital burden on suppliers to ensure compliance.

And compliance with the CPA is essential, as a person convicted of certain offences in terms of the CPA may be liable to a fine or imprisonment or both.

The following five step checklist can assist suppliers to ascertain the compliance (or not) of their business agreements with the CPA:

Step 1
Suppliers should take note of the general provisions of the CPA which are applicable to their agreements, such as, that the agreements must be written in plain, easy and understandable language which allows the consumer to comprehend the content thereof. This can be done by avoiding legalese and small print and opting for simpler and clearly expressed and visible terms.

Step 2
Identify unfair, unreasonable or unjust terms and remove them from your agreement. These could typically be one-sided provisions or provisions providing an unreasonable advantage to the supplier. You may need the assistance of a legal expert to provide guidance on provisions that may potentially be seen as unjust.

Step 3
Pay specific attention to provisions which exempt or indemnify you as supplier of liability and approach these with care. The consumer may not be bound by such provisions if the consumer was not given an adequate opportunity, under the circumstances, to read and comprehend these provisions.

Step 4
The CPA prohibits certain terms also known as the “black list” of terms from being contained in consumer agreements. An example of such a term is the exemption or limitation of a supplier’s liability for any loss attributable to the supplier’s gross negligence. If such terms appear in a consumer agreement, a court may declare these null and void.

Step 5
Lastly, suppliers must check that their agreements do not contain “grey list” terms. These are terms deemed to be unfair, unless the supplier can prove that they are justifiable under the circumstances. An example of such a term is the exclusion or limitation of the liability of the supplier for the death or personal injury caused to a consumer through an act or omission of the supplier. Note, that this presumption will only apply where a supplier is operating primarily for business purposes on a “for-profit” basis and the consumer is an individual who entered the agreement for non-business purposes.

Although the obligations on a supplier to ensure compliance with the CPA could be perceived as ‘onerous’ it is clear that the CPA wishes to prevent unfair and unreasonable results to a consumer flowing from business agreements and not to affect the general commerciality of business agreements. Accordingly, with appropriate legal advice and a sound commercial approach, suppliers can ensure not only their compliance with the CPA but also the adequate protection of their business interests and risks.