Your service agreements, the CPA and the ECTA

Your service agreements, the CPA and the ECTA


Pursuing on from a previous post on service settlement essentials, this posting considers some of the essential provisions of the Purchaser Protection Act 68 of 2008 (“CPA“) and the Digital Communications and Transactions Act 25 of 2002 (“ECTA“) that will likely use when your buyer qualifies as a ‘consumer’ (in phrases of buyer legislation). These should be cautiously deemed when getting ready your services settlement, shopper procedures or conditions and disorders.

A CPA ‘consumer’ is an unique or juristic person (enterprise or CC) with an asset worth or annual turnover that does not exceed R 2 000 000 and normally applies to all transactions amongst suppliers and individuals. ECTA applies to electronic transactions and does not differentiate among men and women and juristic individuals, so applies to each. Except an arrangement is especially excluded from the ambit of the CPA and/or ECTA, these acts will use anywhere the client is a ‘consumer’. In our see, some of the essential provisions of the CPA and ECTA to bear in intellect when contracting with buyers and preparing your company agreements, are sections 14 (Expiry and renewal of fixed-time period agreements) and 17 (Consumer’s proper to cancel advance reservation, scheduling or buy) of the CPA, and sections 42 (Scope of application) and 44 (Cooling-off time period) of ECTA.

If a transaction is concluded electronically, and ECTA applies, the provider will also need to comply with other ECTA obligations. These consist of giving the client with specific data established out in part 43. This calls for the disclosure of certain facts about the provider and involves the provider to offer the client with an opportunity to critique the entire transaction and charges and withdraw from the transaction prior to putting the remaining order. For online transactions, devices as a result will need to permit this.

Returns and cooling off legal rights (for non-faulty merchandise and expert services)

A cooling off appropriate makes it possible for a shopper to return merchandise or cancel an get for products and services with no purpose in which the shopper has simply improved his/her mind. Customers have a “cooling off” right, but only in the next situation:

  • For revenue that are not concluded online, there is a 5 working day cooling off interval for sales resulting from direct promoting. This means that the supplier straight approached the customer to market him/her the goods and the consumer purchased the items as a result of the immediate marketing. This is a right in phrases of portion 16 of the CPA and makes it possible for the consumer to return the merchandise inside of 5 business days of supply or cancel the transaction 5 small business days immediately after it was concluded.
  • If an online sale, ECTA presents a 7 day cooling off period (and there is no direct marketing requirement as for each the CPA), but there are some exceptions to this cooling off correct and not all goods/services can be returned. For expert services, the cooling off correct lapses as shortly as the providers are applied, and particular other transactions are also excluded from the cooling off suitable including certain economical expert services, auctions, consumable foodstuff, customised items, computer software that has been unsealed by the customer, newspapers, periodicals, magazines and publications, gaming and lottery transactions (see section 42(2) of ECTA).

In these instances, the shopper has the right to a complete refund when returning the goods in the recommended period, but the shopper will have to shell out the costs affiliated with returning the merchandise to the provider.

It is significant to bear in mind that the return procedures of suppliers and shops frequently deliver extended legal rights to customers. If the customer is returning products outside the house his/her CPA/ECTA rights, then the phrases of the return plan of the supplier will use and both of those the purchaser and the supplier will require to comply with all those terms. This indicates that if, as the supplier, you offer you superior return rights than those people offered for in the CPA/ECTA, you will be sure by the extra generous conditions made available in your returns plan.

ALSO Study: The great importance and value of a privateness policy

Cancellation charges and deposits 

Section 17 presents that a supplier may possibly involve a deposit to be paid out for an progress scheduling, reservation or an purchase for items or expert services that will be supplied at a foreseeable future day, and on top of that that a provider may cost a fair cancellation penalty if the consumer cancels the superior reserving, reservation or order.  What is realistic depends on the circumstance, but the cancellation penalty will be unreasonable the place it exceeds a truthful amount. To identify what is reasonable in the circumstances, the supplier should consider the nature of the booked items or providers, the size of observe, the potential to locate an option purchaser and common field follow.

Mounted term agreements

Fixed expression contracts are pretty widespread and generally a beneficial mechanism that can be utilized by a supplier to assure confirmed earnings for a minimum interval. These agreements are matter to the terms set out in section 14 of the CPA, which necessitates both suppliers and individuals to comply with particular necessities concerning the greatest time period of the agreement, termination (just before the agreed time period ends), discover intervals and cancellation service fees.

The optimum duration of a fixed term settlement is 24 months, nevertheless this time period can be extended the place the extra interval is to the consumer’s money reward. A common illustration of this is a cell phone contract that extends more than 36 months, thereby letting the buyer a for a longer period time period to pay for the machine.

A buyer may perhaps terminate a fixed-expression arrangement on the expiry of the settlement without having penalty (the purchaser will remain liable to the supplier for any quantities owed to the provider beneath the arrangement till the date of cancellation), or at any other time (during the mounted time period) by supplying the supplier 20 business times of see. Where the settlement is cancelled before the end of the fixed term, the supplier may charge the shopper a reasonable cancellation penalty. A cancellation penalty need to be affordable and have to not have the effect of negating the consumer’s correct to cancel the fixed expression agreement. The rules to the CPA have set out a listing of facets that have to be regarded when determining what a sensible cancellation penalty would be.

A supplier may also cancel a fixed expression arrangement, but only if the buyer has breached the agreement. If the arrangement has been breached (for case in point, the shopper hasn’t paid out the regular payment), the supplier should give the customer created detect that the settlement will be cancelled if the shopper does not remedy the breach (spend the regular payment) inside 20 business days. In that case, the buyer will still be liable to the provider for any quantities owed to the provider at the day of cancellation.

If you have a mounted expression settlement, you will also need to contemplate area 14 if your settlement automatically renews for more fixed conditions or carries on on a thirty day period to month basis right after the initial preset expression ends.

*Importantly, section 14 of the CPA does not utilize to preset phrase agreements where the buyer is a juristic individual, no matter of the annual turnover or asset value of the juristic person.


The previously mentioned sections of the CPA and ECTA are only a number of of the critical factors to contemplate when getting ready your services agreement, and the pertinent sections will vary depending on your certain small business and business. It is significant to make absolutely sure that your procedures on returns, reserving fees and deposits (and when these would be forfeited) are established out obviously and that your shopper is mindful of and understands these insurance policies. If entering into mounted time period agreements, you will need to make sure that your cancellation penalty is realistic and that your shopper understands the two the implications of them cancelling the agreement prematurely and what will happen at the close of the fastened time period.

Get in touch to explore these factors and other crucial CPA and ECTA provisions that may be applicable to your enterprise.

Created by Jessica Paterson

This article was originally revealed by Dommisse Attorney’s Inc

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