A fixed term contract in terms of the CPA is an agreement between a supplier and a consumer as defined in terms of Section 5 of the act. Juristic persons are excluded from Section 14 of the CPA and are applicable only on agreements where natural persons/consumers are a party to the agreement.
The period for a fixed term contract in terms of the CPA is a maximum of 24 months and or 2 years. This means that any clause stipulated in a fixed term contract that states the defer, is incorrect void in terms of Section 14 of the CPA.
In terms of Section 14(2), (b) either the consumer and or the supplier are entitled to cancel the fixed term contract at any time during the period of the contract, without receiving any penalty and or charge for canceling the agreement. What clearly stands out is that a cancellation notice period of 20 business days must be rendered for a cancellation to be effective.
The supplier is additionally 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.
It is important to remember that in terms of Section 14 of the CPA the consumer is still accountable for all payments up until the termination of the agreement. The CPA goes further and implies that the supplier has the right to ask a reasonable cancellation fee at the early termination of such a consumer contract.
The Supplier is directed in terms of the Regulations on how to estimate a reasonable cancellation fee and the following factors must be considered when accumulating such a cancellation fee:
- the sum which the consumer is still accountable for to the supplier till the date of cancellation;
- the cost of the contract till the date of cancellation;
- how much the goods are worth which will remain in the possession of the consumer after the cancellation of the contract;
- what the goods are worth that is returned by the consumer, 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; and
- the overall practice of the applicable trade.
ABOUT THE AUTHOR
Altus de Wet is a SEESA Consumer Protection & POPI Legal Advisor at the Bloemfontein Branch.