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How to cancel a fixed-term contract

How to cancel a fixed-term contract

In terms of Section 14 of the Consumer Protection Act (CPA), a consumer can cancel a fixed-term contract at any time within contract period without any penalty or charge, within 20 business days’ notice to the supplier.

The legal duration of fixed-term contracts

Section 14 of the CPA restricts the period of a fixed-term contract to 24 months (however, Section 14 does not apply to transactions between juristic persons or where the consumer is a juristic person as stipulated in Section 5 of the CPA). This Section replaces any clause that states differently in a consumer contract.

The supplier is required to give notice to the consumer of the pending termination of the fixed-term contract – not more than 80 and not less than 40 business days – prior to the termination thereof. This notice must include any substantial changes that would apply if renewed and all the choices available to the consumer. If the consumer does not respond to such a notice, the CPA makes provision that such an agreement will continue on a month-to-month basis, subject to any material changes unless the consumer has specifically stated to the contrary.

Cancellation fo fixed-term contracts

It is very important to remember that, if a contract is cancelled, the consumer is still liable for all payments up to the end of the cancellation period. The CPA goes further and implies that the supplier has the right to ask a reasonable cancellation fee at early termination of such a consumer contract. The regulations prohibit the supplier to burden the consumer with a cancellation fee/penalty that would prevent the consumer to cancel the contract.

The supplier is guided in terms of the regulations on how to calculate a reasonable cancellation fee and the following factors must be considered when compiling such a cancellation fee:

  • The sum which the consumer is still accountable for to the supplier until date of cancellation.
  • The cost of the transaction until the date of cancellation.
  • How much the goods that will remain in the possession of the consumer after cancellation of the contract, is worth.
  • What the goods that are returned by the consumer, is worth to the supplier.
  • How much time is left on the contract as agreed to.
  • Damages/losses suffered by the supplier as a result of the cancellation of the contract.
  • The type of the goods or services that were rendered to the consumer.
  • The notice period for cancellation given by the consumer.
  • The realistic potential for the supplier to find another consumer between the time of getting the cancellation notice and the time of the cancelled booking.
  • The overall practice of the applicable trade.

ABOUT THE AUTHOR:

Altus de Wet is a SEESA Consumer Protection & POPI Legal Advisor at the Bloemfontein Office.

 

 

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