Prior to the Consumer Protection Act, No 68 0f 2008 (CPA); which came into effect on the 1st April 2011; the law of contract and the common law dealt exclusively with the issue of when, where and how affixed term agreements expired or were renewed.
This situation has all now changed, since the commencement date of the CPA; and consumers and suppliers/service providers must now comply with the provisions of the CPA; when cancelling, renewing or renegotiating the terms of such contracts, at the expiration of those contracts.
Prior to April 2011; both parties were pretty much bound by the terms of the specific agreement and this was very much weighted in favour of the suppliers.
In the CPA: Chapter 2: Fundamental Consumer Rights: Part C: Consumer’s Right to Choose: Section 14 deals with the Expiry and Renewal of Fixed- Term Agreements; which is the heading to Section 14; which has 4 sub-sections.
Firstly; we need to know what a “fixed –term agreement” is:
Section 1: defines an agreement as: “(an 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 that this includes both oral and verbal agreements; as it does not limit such an agreement to written documents.
“Fixed- term” agreements are not defined; but clearly mean exactly what the words say. They are clearly agreement entered into for a fixed period of time. Lease agreements, credit agreements, purchase agreements, cell phone, tablet or computer agreements, data and rental agreements all fall under this definition.
Section 14(1) starts: “This section does not apply to transactions between justice persons regardless of their annual turnover or asset value.”
This means that all fixed terms agreements between juristic persons are excluded from the provisions of this section of the CPA. In other words, this section only applies to natural persons ie individual consumers and natural persons like you and me; and not companies, close corporations trusts, body corporates and other juristic legal persons. This is the first important aspect to note.
Section 14(2) reads: “ If a consumer agreement is for a fixed term:-a. the term must not exceed the maximum period, if any, prescribed in terms of sub-section (4) with respect to that category of consumer agreement.”
Section 14 (4) simply states that the Minister may set the maximum duration for various different fixed term contracts most of which are for two years. It also provides for the manner and form of providing notices and for the manner, form and basis of determining credits and charges and other ancillary and incidental issues for fixed term agreements. It is not quoted verbatim here.
Section 14 (2) (b) states that “despite any provision of the consumer agreement to the contrary:
- the consumer may cancel that agreement: (aa) upon the expiry of its fixed term, without penalty or charge, but subject to subsection (3)(a) and (b); or (bb) at any other time, by giving the supplier 20 business days’ notice in writing or other record, manner and form, subject to subsection (3)(a) and (b); or
- the supplier may cancel the agreement 20 days after giving written notice to the consumer to comply with the agreement, unless the consumer has rectified the failure within that time.”
This is a clear right now for both consumers and suppliers as set out in these subsection of the CPA; and is pretty straight forward provided the terms of the sub-sections are followed fully.
The renewal of fixed term contracts is further expanded by the terms of subsection 14(2) (c) which reads: “ (of) not more than 80, nor less than 40, business days before the expiry date of a fixed term agreement, the supplier must notify the consumer in writing or any other recordable form, of the impending expiry date, including notice of (i) any material changes that would apply if the agreement is to be renewed or may otherwise continue beyond the expiry date; and (ii) the options available to the consumer in terms of paragraph (d); and (d) on the expiry of the fixed term of the consumer agreement, it will be automatically continued on a month to month basis; subject to any material changes of which the supplier has given notice, as contemplated in paragraph (c) unless the consumer expressly:- (i) directs the supplier to terminate the agreement on the expiry date; or (ii) agrees to a renewal of the agreement for a further fixed term.”
The terms of these subsection are pretty self-explanatory and now compel suppliers to comply fully with them towards the end of a fixed terms contract.
Subsection (3) of section 14 reads: “Upon cancellation of a consumer agreement as contemplated in subsection (1)(b):- (a) the consumer remains liable to the supplier for any amounts owed to the supplier in terms of that agreement up to the date of cancellation; and (b) the supplier (i) may impose a reasonable cancellation penalty with respect to any goods supplied, services provided, or discounts granted, to the consumer in contemplation of the agreement enduring for its intended fixed term, if any; and (ii) must credit the consumer with any amount that remains the property of the consumer as of the date of cancellation, as prescribed in terms of subsection (4).”
Again the terms of the subsection are clear and speak for themselves.
This concludes our analysis of section 14 of the CP Act dealing with the expiry and renewal of fixed-term agreements.
The Legal Advice Office Team.