At the Legal Advice Office, we deal with Consumer Law and one of the main issues we deal with is the question of defective vehicles.
In any particular week, these are some of the queries we get.
“I bought a defective vehicle; can I return it to the dealership and what are my legal rights”?
“I bought a vehicle through finance; and its broken down. Can I return it to the bank or the dealer within 30 days, or what is the period that I can return it”?
“Can I return a defective financed car”?
“How can I go about returning a financed vehicle which is unreliable”?
“My car has broken down 4 times, can I give it back to the dealer and the bank and get my money back”?
“Can I return a car bought on finance if it has ongoing problems”?
“How do I return a faulty car to the bank or the seller”?
These are all simple questions; but the answer to them; is not that simple.
Let me explain:
Over and above your common law rights, in having been sold a defective “merx” which results in your having both contractual and delictual rights against the seller; you also have the protection of the
The Consumer Protection Act No 68 of 2008 (CPA):
Section 56(2):
deals with the implied warranty of quality for all goods.
Section 56 (2) reads as follows:
Section 56 Implied warranty of quality
Subsection 2 reads:
(2) Within six months after the delivery of any goods to a consumer, the consumer may return the goods to the supplier, without penalty and at the supplier’s risk and expense, if the goods fail to satisfy the requirements and standards contemplated in section 55, and the supplier must, at the direction of the consumer, either: —
(a) Repair or replace the failed, unsafe or defective goods; or
(b) Refund to the consumer the price paid by the consumer, for the goods.
Section 56(2) therefore deals with the available remedies to a consumer who has bought a defective product.
What then are these available remedies if you have bought a defective motor vehicle?
I will deal with these remedies in detail below.
Please bear in mind at all times that the law and the CPA are complex and complicated and you should ALWAYS seek professional help in resolving these types of legal issues.
Section 56(2) (a) provides that the consumer may choose to return the goods or demand that “the failed, unsafe or defective goods” are either repaired or replaced by the service provider.
It is not clear why the section refers to goods which are “failed”, “unsafe” or “defective” as these specific words, although defined in section 53(1), are not, save in the case of the word “defect” in section 55(2)(b), mentioned at all in section 55 of the CPA.
This creates an unnecessary ambiguity as section 56(1) and (2) specifically provide that it is a failure to comply with the standards set by section 55 that will give rise to liability under section 56(2)(a).
While the uncertainty is unfortunate and does not lend clarity to the standards and requirements required, the practical effect of this ambiguity is, for the most part, minimal and of little consequence.
“Failed” in this context is a reference to a “product failure” which is defined in section 53(1) (b) as “the inability of the goods to perform to the intended manner or to the intended effect”. The inability of the goods to meet the standards contemplated in section 55(2) (a) (if goods are not suitable for the purposes for which they are generally intended), section 55(2) (b) (for instance, if the goods were not “in working order”) or section 55(2) (c) (if the goods are not usable and durable for a reasonable period of time) are nothing but specific manifestations of a “product failure”.
Section 56(2) (a) provides that “the supplier must, at the direction of the consumer, either (a) repair or replace the failed, unsafe or defective goods; or (b) refund . . .” The way in which this right is formulated in this subsection creates the possibility that it may be interpreted to mean that the consumer can choose between paragraphs (a) and (b); but once that choice is made, the supplier can choose whether to repair or replace the goods.
There is an alternative interpretation and that is that the consumer has the choice between any of those three. This would mean that the consumer can insist on replacement goods even where the goods can be repaired economically. However, if the legislature intended that the consumer should have a choice between all three remedies, the section would presumably have been phrased so that “the supplier must, at the direction of the consumer either (a) repair the goods; (b) replace the goods or (c) refund the consumer”. It appears as if the National Consumer Tribunal has opted for the interpretation that the consumer can select any of the three remedies but is willing to intervene when the selected remedy is impractical under the circumstances of any particular case.
Section 56(2) (b) gives the consumer the further option to return the goods and demand that the supplier refunds the price paid by the consumer. This is generally considered a drastic remedy, which operates even more harshly here; because the CPA does not qualify its availability in any way, save for the general limitation that the remedies in terms of section 56(2) must be exercised within six months after delivery. As will be discussed immediately below, this is a departure from the approaches followed in other jurisdictions and operates too harshly against suppliers and will lead to uneconomical results where (for instance) the defect is relatively minor and easy to repair. Unlike section 20(6), section 56 does not provide that the supplier can make any deductions for the use of the goods. This will operate unfairly where a consumer enjoyed a long period of uninterrupted use of a product before it became faulty. The unfair operation of this omission against suppliers is exacerbated by the fact that section 56(2) does not provide for a price reduction as another alternative and that the defect need not be present at the time of delivery.
Note also that section 56 itself does not provide for a claim for damages. This is governed by section 61 of the CPA. The relationship between sections 56 and 61 as well as the residual common-law claim for damages are also discussed below.
- THESE REMEDIES ARE ONLY AVAILABLE FOR SIX MONTHS
Section 56(2) provides that “within six months after the delivery of any goods to a consumer, the consumer may return the goods to the supplier, without penalty and at the supplier’s risk and expense, if the goods fail to satisfy the requirements and standards contemplated in section 55” and demand a refund or to have the goods replaced or repaired. The insertion of a six-month limitation is problematic as it contradicts section 55(2)(c) which provides that “every consumer has the right to receive goods that . . . (c) will be useable and durable for a reasonable period of time, having regard to the use to which they would normally be put and to all the surrounding circumstances of their supply”.
It can hardly be said that a ‘” reasonable period of time” for purposes of section 55(2) (c) will always be less than six months. The problem which arises is best illustrated by way of an example: Say a consumer purchases a washing machine. No express warranties are given. The washing machine breaks after eight months. The consumer is able to prove that a washing machine could reasonably be expected to last for longer than eight months. In this case, the supplier is in breach of the implied “warranty in section 56(1) as the goods are not useable and durable for a reasonable amount of time and therefore, the standard contemplated in section 55(2) (c) was not met.
When viewed in isolation, the remedies contained in section 56(2) are not available to the consumer, who bought the washing machine, as more than six months have lapsed. The problem which a consumer faces in this set of facts is that neither section 55 nor section 56(1) gives any indication of what the consumer’s remedies are in the event that these sections are contravened apart from the remedies given in section 56(2) or any express warranty which may have been given. One possible answer is that the consumer is left with the common-law remedies such as the aedilitian actions of a cancellation and a refund, if the defect is of a sufficiently serious and material nature, or, otherwise, a price reduction, if it is not; as long as the defect was present at the date on which the contract was concluded.
However, this would mean that the right to goods which are durable for a reasonable amount of time would be of very little real value. Another possible answer is that it is only the availability of the remedies that lapse and that the implied warranty created by section 55(2) (c) still continues to exist after six months. The consumer is then left with a right without a remedy in terms of the CPA, which is also not an enviable position to be in. After conducting a survey of the durability requirements in other jurisdictions, the Consumer Goods and Services Ombud submits that “there is no reason why the repair or replacement of the goods for a full or partial refund should not continue to be possible”.
Interestingly, however, the Ombudsman is of the view that “it can be inferred from section 55(2) (c) that, after the six months, it would be the prerogative of the supplier and not the consumer to select the appropriate remedy. The requirement that the return of the goods is without penalty and at the supplier’s risk and expense would also fall away at the end of the six-month period.” This in my view is an incorrect interpretation and this unsatisfactory position can only truly be resolved through some future legislative reform. In the interim, the National Consumer Tribunal or a court could make use of its more robust powers in terms of the CPA to “promote the spirit and purposes of this Act” and “make appropriate orders to give practical effect to the consumer’s right of redress, including but not limited to . . . (b) any innovative order that better advances protects, promotes and assures the realisation by consumers of their rights in terms of this Act.” One such order may be to extend the right to goods that “will be useable and durable for a reasonable period of time” beyond the period of six months after their supply.
In summary, the legal position is that the remedies provided for in section 56(2) will only be available for the first six months after delivery of the goods. After the expiry of this period the consumer will be able to rely on the residual common-law remedies and, should harm have arisen from the “defect” in the goods, a claim for damages under either the common law or under section 61 of the CPA. However, the National Consumer Tribunal or court may make use of its powers in terms of s 4(2) (b) (ii) (bb) to extend the application of section 56(2) beyond the period of six months by making an “innovative order” to that effect.
However, please bear in mind that up until now, the courts have not shown the willingness to protect consumers beyond the six-month period. In the matter of MFC (a division of Nedbank Ltd) v Botha, the court held in an obiter dictum that a vehicle could not be returned because the six-month period had lapsed. It is submitted that this approach is incorrect; and that a more purposeful approach to the interpretation of section 56(2) is justified in light of the ambiguity created by the right to goods which are usable and durable for a reasonable period of time in terms of section 55(2)(c). However, in the case of Vousvoukis v Queen Ace CC t/a Ace Motors, the court disagreed with this criticism of the MFC case and held that “[t]he Legislature, for whatever reason, has expressly decreed a limitation period of six months for the return of any goods in terms of section 56(2). There is no question of section 56(2) being ambiguous in any way.
In my view, it is not open to a court, under the guise of making an “innovative order”, to extend this period. Any innovative order made under section 56(2) must be made within the constraints of the legislation and cannot afford consumers more rights than those specifically provided for in the Act.” Incidentally, the complainant in that case, was also unsuccessful based on the claim in terms of the actio redhibitoria as the defect in that case (a faulty oil pump in an engine) was deemed too minor and not material enough to warrant a return. Consequently, the consumer, in that case, was left with no remedy for his defective car.
That appears to be against the spirit and intent of the CPA. It appears that the National Consumer Tribunal is also interpreting the application of the six-month period strictly. The counterargument remains that this has the “unintended consequence of undermining or rendering nugatory the right to goods that are durable for a reasonable period of time. This is particularly so in respect of so-called durable goods (defined as a category of consumer products that do not need to be purchased frequently; because they are made to last for a long time (usually lasting for three years or more).” The irony of this situation is that the more expensive the goods (for example motor vehicles, furniture, televisions, washing machines and refrigerators), the more likely it is that the current approach will deprive a consumer of the remedies provided for in the CPA. This surely is wrong; and could not have been the intention of the legislature.
The time period for which remedies will be available to a consumer is uncertain in the context of goods which fail to satisfy a specific purpose for which it was bought, and which was communicated to the supplier. The uncertainty is created by the existence of section 20(2) (d) which provides that a consumer who is saddled with goods which do not conform to this specific purpose only has 10 days from delivery to return the goods to the supplier. Section 20(1) (a) provides that section 20 applies “in addition to and not in substitution for (a) the right to return unsafe or defective goods, contemplated in section 56. As unsatisfactory as this may be, it means that the consumer will be able to choose the section which suits his or her needs the best under the circumstances.
In addition, the consumer will also be able to institute a claim in terms of the common law after the 10-day period has lapsed. This was discussed immediately above in the context of the six-month period limitation.
This is the result of the general savings clause in section 2(10), but also section 20(1) (b) also provides that section 20 “is in addition to and not in substitution for . . . (b) any other right in law between a supplier and consumer to return goods and receive a refund.” The “right in law” referred to here can be a common-law right or a warranty contained in the contract between the consumer and the supplier. It is important to note that a contract cannot limit the consumer’s rights under the CPA.
- THE SIX-MONTH PERIOD COMMENCES UPON “DELIVERY”.
This operates extremely unfairly in those instances where the defect complained of is a latent defect and only emerges in month 7 and it is therefore not consistent with the well-established law relating to prescription which provides that prescription only starts to run when a debt is due, which in turn is only the case once the debtor becomes aware of the debt. It also appears from the wording of the subsection that the consumer will have to tender the return of the product within the 6-month period in order to avoid disappointment. The period could also potentially operate unfairly in cases where the consumer opts for having the goods repaired, but the repairs do not remedy the defect. In such cases, the consumer will however be able to rely on section 56(3), which provides for a further 3-month period extension. When presented with this difficulty, the National Consumer Tribunal solved the issue by relying on section 54(1) and giving the consumer a refund for poor service delivery. Lastly, the fact that the application of the CPA was not confined to movables is problematic. In the case of movables, “delivery” takes place when possession is transferred. This is also the time when ownership passes. The equivalent moment in respect of immovables is against registration. Thus, when this line of reasoning is followed, the 6-month period in section 56(2) only commences on registration.
This interpretation has some strange results.
It means that the consumer may sign an offer to purchase, take early occupation and then months later, after registration takes place, the consumer may rescind the contract. One may argue that this absurdity should be avoided by taking “delivery” to mean actual “occupation”. This is after all the time at which the consumer is able to detect defects if any exist. This should preferably be addressed by the legislature by either removing the reference to immovable property completely or by taking a different approach to consumer protection in that context (either in this Act or another).
- THE CONSUMER’S CHOICE BETWEEN REMEDIES IS UNFETTERED
The remedies in section 56(2) (a) and (b) are separated by the conjunction “or’ and followed by “at the direction of the consumer”. This means that the consumer has an unfettered choice between the remedies. This is a departure from the approach at common law where the degree of defectiveness will influence what remedies are available to the buyer. So, where the defect is not so insignificant so as to fall foul of the de minimis rule but is not serious enough to justify the cancellation of the agreement, a buyer would be able to rely on the actio quanti minoris in order to demand a reduction of the price. In cases where the interference with the utility of the goods is serious, the buyer would have the additional choice to rely on the actio redhibitoria which is an action for the rescission of the contract and a refund of the purchase price.
However, there have been at least three cases in which the National Consumer Tribunal “fettered “the consumer’s discretion on the grounds that the choice was impractical or unfair.
Although the choice of remedy, ie the 3 R’s, a refund, replacement or repair, appears to be derived from the EC Consumer Sales Directive, the unfettered discretion given to the consumer is not. Under the EC Consumer Sales Directive, the consumer must first choose between a repair and a replacement unless either is impossible or disproportionate.
A remedy will be considered disproportionate if it “imposes costs on the seller which, in comparison with the alternative remedy, are unreasonable, taking into account the value the goods would have if there were no lack of conformity, the significance of the lack of conformity, and whether the alternative remedy could be completed without significant inconvenience to the consumer”. Where both repair and replacement are disproportionate, the consumer will be entitled to either a reduction in the price or rescission of the contract. These second-tier remedies will also be available if the supplier could not complete the replacement or repair within a reasonable time or without significant inconvenience to the consumer.
Rescission will never be available if the defect is minor.
This approach is to be preferred as it takes into account circumstances such as the cost of repairs versus the value of the product, the availability of the replacement product and the degree of non-conformity and according to this approach, a consumer will not be granted an unlimited right to rescind a transaction. Giving the consumer an unlimited discretion and a right to a refund is unfair to suppliers. There have been some references to the choice of remedy versus the materiality of the defect by the National Consumer Tribunal (albeit obiter).
The consumer, in one case, had bought a vehicle and discovered a small bubble on one of the interior panels of a door as well as a problem with the fuel gauge. The consumer wanted to return the vehicle.
The Tribunal set the compliance notice aside because the National Consumer Commission failed to investigate the matter. However, the Tribunal made the following statement: “While the Tribunal will acknowledge that a problem of this nature can be seen as a defect from a cosmetic perspective, it would be hard-pressed to find that it rendered the entire vehicle as unsuitable, of bad quality and unusable and therefore not compliant with the requirements set out in Section 55(2) (a) to (c). On the evidence available and in this specific matter, it would have been reasonable for the Applicant to simply replace the defective part with a new part . . . .” The Tribunal has also shown a willingness to reject the consumer’s election to have the goods repaired in instances where it is impractical.
Lastly, the Consumer Goods and Services Ombud has also issued an advisory note on this issue.
After considering foreign law for guidance the Ombud concludes that:
“It follows that if the fault is something that could easily be remedied or repaired, it would not give rise to a right to cancel the agreement and obtain a refund. An example is a drawer that squeaks or something that needs minor adjusting. If, however, the goods would need to be sent off for repairs, it is less likely that the defect is one that is insignificant. The same is true where the problem reoccurs after an apparently insignificant defect has been repaired. At that point, the consumer would be entitled to demand a replacement or refund.”
This should be addressed explicitly by the legislature to avoid continued and further uncertainty.
- THE RETURN OF THE GOODS AND REFUND OF THE PURCHASE PRICE
It appears that returning the product is a prerequisite for a refund in terms of section 56(2). However, what of cases where it is impossible to return the goods or impossible to return the goods in the same condition they were in when purchased? Under the common law, cancellation may still be possible in circumstances where it is impossible to return the goods and the inability to restore is not the consumer’s fault. Examples are where the goods were damaged or destroyed as a result of the defect or where it was depleted by the ordinary and intended use of the goods. It is submitted that this approach should be taken to claims in terms of section 56(2). When goods are returned in terms of this section it is at the “at the supplier’s risk and expense”. This means that the supplier is at risk for loss or damage to the goods in transit and during investigations or repairs.
Should the goods be lost or damaged in transit the supplier will remain liable to the consumer for a full refund. In terms of section 19(3) (c) risk passes to the consumer upon the delivery of the goods. The operation of this section has the potential to create some uncertainty as to when exactly the risk of loss or damage passes back to the supplier, particularly if the consumer does not notify the supplier that the goods must be collected and elects to make arrangements for the delivery of the goods himself/herself. Suppliers would be well advised to provide for procedures which the consumer must follow if the consumer wants to return the goods to ensure that the supplier has control over the transport of the goods and can take proper precautions against further loss or damage.
The condition of the goods at the time at which it leaves the consumer’s control should be carefully recorded to avoid disputes. The supplier must also carry the cost of transporting the goods. The section does not say that the supplier must collect the goods. Therefore it could also include situations where the consumer returns the goods, and the supplier refunds the cost of the transport. Section 56(2) makes no mention of interest on the purchase price or expenses incurred in relation to the goods and whether these amounts must also be refunded. In terms of the common law, a purchaser who is returning goods will be entitled to interest as well as any costs which the buyer incurred “in connection with the delivery, preservation, and maintenance” of the goods.
Unlike section 20, which governs returns in a different context, section 56(2) contains no provisions relating to liability for the use, depletion or deterioration of the goods. The question is whether a supplier who is accepting the return of the goods in terms of section 56(2) has any claim in respect of the use of the product. Section 56(2) provides that “the consumer may return the goods to the supplier without penalty”.
This means that the supplier cannot deduct any “penalties”, but a penalty does not include a potential claim for the use of the goods. In the UK Sale of Goods Act, 1979 “any reimbursement to the buyer may be reduced to take account of the use he has had of the goods since they were delivered to him. In contrast, article 112(2) of the Proposal for a Common European Sales Law (CESL) provides that a consumer is not liable for the use of the replaced goods. In the context of the cancellation of the contract, article 174 of the CESL provides that the consumer may have to pay for use where “having regard to the nature of the goods, the nature and amount of the use and the availability of remedies other than termination, it would be inequitable to allow the recipient the free use of the goods for that period”.
Under the common law, the seller would be entitled to set the interest on the purchase price off against “fruits or profits from the use of the thing sold”. In other words, the buyer must return the fruits or profits. However, the seller cannot hold the buyer liable for deterioration which is the result of the reasonable use of the goods, ie the buyer is not liable for “fair wear and tear” on the goods. The reason is that “[t]he very contract of sale gives the purchaser the right to deal with the thing bought, and if it deteriorates in the hands of the buyer whilst making a reasonable use or trial of it, the reduction in value resulting from such depreciation must be borne by the seller”.
The seller will also not be able to charge the consumer for the use of the goods. Compare this to section 20(6) in terms of which the supplier has the right to deduct certain charges from the purchase price if goods are being returned under that section which may include (under certain circumstances) a claim for the use of the goods. It is submitted that had the legislature intended it, section 56 would have contained a similar provision and that a claim for use of the defective product cannot be brought against a consumer.
- STORE REFUND POLICIES MUST NOT LIMIT THE CONSUMERS’ RIGHTS IN TERMS OF THE CPA.
Relationship with section 61
The relationship between section 56 and section 61 is again problematic; as there appears to be some overlap. The authors Loubser and Reid comment that the harm referred to in section 61(5) could also include the defective product itself which means “apparently, that a juristic person which does not qualify as a “consumer”, such as a company operating a large retail chain, will nevertheless be entitled to rely on the strict liability provisions in section 61 to claim compensation from a supplier for defects in the goods themselves”. The use of the term “warrant” in section 56(1) is unfortunate as it leads to unnecessary confusion regarding the consequences of a failure to meet the requirements of section 55, in particular, whether it gives rise to a claim for damages as would normally be the case if a consensual warranty is breached or in the limited circumstances where such liability is implied by the law of sale. It is important to establish the exact parameters of the remedies available under the CPA as the residual common-law remedies can still be excluded in the contract with the consumer. As a start, section 56(2) provides that if this warranty is breached the consumer may elect to either return the goods for a full refund or the consumer may demand that the goods be replaced or repaired. It does not provide for any claim for consequential loss caused by the defective goods.
However, section 61 allows consumers to claim for harm to their person or property (and economic loss resulting from that harm) suffered as a result of damage caused by unsafe goods, a product failure, defect or hazard or inadequate warnings. Regardless of the use of the term “warrant” in section 56 it does not give rise to an independent claim for consequential loss suffered as a result of the defect in the goods. Section 61 is the only section which regulates liability for damages, as its heading, “Liability for damage caused by goods”, suggests.
The distinction between liabilities under section 56 as opposed to section 61 is significant because section 61 gives suppliers’ defences which are not mentioned in sections 55 and 56. In particular, section 61(4)(c) provides that retailers and distributors will not be liable under that section if “it is reasonable to expect the distributor or retailer to have discovered the unsafe product characteristic, failure, defect or hazard, having regard to that person’s role in marketing the goods to consumers”. It can hardly be the case that consumers can simply circumvent this defence by relying on sections 55 and 56 to claim damages instead of section 61.
In summary,
A consumer will not be able to rely on section 56 to claim damages despite the use of the term “warrant” but must rely on section 61. It will still be open to a consumer to rely on the common law to claim for consequential loss, but a supplier is still able to contract out of that liability as long as the consumer’s ability to claim under the Act is not limited.
This concludes the commentary on section 56 (2).
The remedies available to a consumer are complex and you should not try to deal with these matters on your own. You need an expert in your corner! You also need proper professional legal advice as every case differs on the facts!
Please visit our website at www.legaladviceoffice.co.za or send us an email to [email protected] and we will respond to your legal queries within 48 hours.
About our author:
Hugh Pollard (Legal Consultant)7has a BA LLB and 42 years’ experience in the legal field. 22 years as a practicing attorney and conveyancer; and 20 years as a Legal Consultant.
082-0932304 (Hugh’s Cell Number)
