1 P a g e VOETSTOOTS: EASY WAY TO UNDERSTAND AFTER THE CPA CONSUMER PROTECTION ACT

Size: px

Start display at page:

Download "1 P a g e VOETSTOOTS: EASY WAY TO UNDERSTAND AFTER THE CPA CONSUMER PROTECTION ACT"

Ethan Townsend
5 years ago
Views:

1 VOETSTOOTS: EASY WAY TO UNDERSTAND AFTER THE CPA CONSUMER PROTECTION ACT Act became fully operational in March 2011 and introduces a regime in which consumers are afforded certain basic consumer rights. To a large extent the consumer is "bubble-wrapped" and huge liabilities are imposed on the shoulders of so-called suppliers. The Act contains 8 fundamental consumer rights, each which branches into various related forms of protection for the consumer. All in all there are 60 sections dealing just with specific rights of consumers! Amongst these rights are the right to receive quality goods without defects Our discussion today will deal with three scenarios being: i) The position where the CPA applies; ii) The position where the CPA is not applicable iii) The estate agent's position. Position where the CPA applies CPA only applicable if I have a 'supplier' (as defined) and a consumer (as defined) in a marketing relationship or when these parties contract with each other Supplier, per definition, is someone (individual or entity) who provides goods or services in the ordinary course of business, A consumer, per definition, are all natural persons as well as legal entities with an asset value or annual turnover below R3 million (this threshold applies only in respect of the definition of a 'consumer'. Turnover or asset value is not relevant when we look whether an individual or entity is a 'supplier') Typically these agreements will be those where a developer sells to an individual purchaser. If CPA applies (developer, property investor) then consumer has section section 55 rights. This right must be understood in the context of the meaning of the term 'defect' in the CPA. (More of this in next slide) CPA continues The definition of the term 'defect' in section 53 of the Act, together with the wording of both section 54 and section 55, repeatedly refer to defect "in the circumstances" of the supply. Clearly the legislature did not mean that a defective good delivered in terms of an agreement that is covered by the CPA is necessarily contrary to the provisions of section 55. The circumstances of the supply plays a vital role in this assessment. As such, whilst there is a duty on a supplier to furnish goods to the consumer that are of a certain quality and free from defects, the expectation of the consumer "in the circumstances" is relevant. 1 P a g e

2 As such, it is advisable that such agreements include a reference to the "circumstances of the supply", i.e. by including in the sale agreement a description of the property in terms of section 55(6), including the history of property, its age, repairs effected, and to include current defects known to the seller. The agreement can also include general statement that the seller is not aware of any defects other than those disclosed, but that the property may or may not have additional defects, listing things like leaky roof, dampness. (Purchaser will initial next to these.) This should be followed by a statement that property is for sale AS DESCRIBED. CPA does not apply Ordinary seller and purchaser, or purchaser is not a 'consumer' as defined; the usual 'private' sales. Voetstoots must remain in agreement to protect seller. Voetstoots works as follows protects seller from comebacks if he was honest ie if he made known defects he was aware of and did not fraudulently conceal these. 'Voetstoots' is a Roman Dutch term used to describe the action of buying something as is; as it stands and in whatever condition it is. It is essential that all sales of properties purchased second hand, which properties are expected to have deteriorated through normal wear and tear, or which may be defective to some extent as a result of constant use, or through natural decay over a period of time, be sold "as is". The underlying purpose of a 'voetstoots' clause is to shield the seller from any action by the purchaser on discovering any defects he was not aware of when purchasing the property from doing anything which will jeopardise the transaction. The 'voetstoots' clause also draws a line in the sand as to when the seller's responsibility for the property terminates; otherwise the seller is forever open to comebacks. The 'voetstoots' clause absolves the seller from any patent defects. However the exemption is not absolute in respect of latent defects. A patent defect is a defect that is clearly visible on a normal inspection of the property. It is a purchaser's duty to acquaint himself with the general condition of the property on purchasing it as he cannot later claim that he did not see such defects. A latent defect is a defect that cannot be seen or ascertained upon a normal inspection of the property. How does 'voetstoots' work? The 'voetstoots' clause only protects the seller from latent defects, which he, the seller himself, was not aware of at the time of the sale. If the seller knowingly conceals, or does not disclose a latent defect which he is aware of, the seller will be liable to the purchaser for the repair of that latent defect provided the seller can be said to have believed that a disclosure of the defect could affect the purchaser's perception of the property negatively. 2 P a g e

3 Position of Estate Agents The CPA always applies where the services of an estate are utilised, in the sense that the estate agent is a supplier (of estate agent services) in the ordinary course of business. Therefore in the mandate relationship with the seller and in the relationship as marketer to potential purchasers, the CPA is relevant to the estate agent. This means that there must be Responsible marketing, Honest dealings, Equality and privacy and Full disclosure of information. However, this is nothing new to estate agents all these requirements have always been imposed on estate agents by their Code of Conduct! (Do not confuse this with the position in a private sale. The transaction between the seller and purchaser remains outside the ambit of the CPA but the services rendered by the estate agent to both must be compliant with the CPA). How much disclosure? What about the Property Condition Report? Assuming it is the seller of a property who gives an estate agent a mandate then the Seller is the principal of that estate agent. It is to the seller that the estate agent owes the utmost duty of care. Section of the Code of Conduct. Section of the Code of Conduct imposes upon the estate agent a duty to disclose facts concerning the property that he may or should have personal knowledge of and which could be material to a purchaser. That is, an estate agent cannot keep information he is aware of away from the purchaser if he believes that that information is, or could be regarded as, material by the purchaser. There is however no obligation on an estate agent to carry out an investigation in respect of a property so as to place himself in a position to make representations regarding that property or to carry the burden of inspecting the property for patent defects which can easily, and which should, be ascertained by the purchaser for himself. The obligation to convey facts concerning the property that are, or should reasonably in the circumstances be within the personal knowledge of the estate agent, does not mean that the purchaser becomes the client of the estate agent. What it means is that the estate agent cannot withhold information, that he has, or should have knowledge of, to the detriment of the purchaser. That is, the agent has to conduct himself honestly and openly in his dealings with the Purchaser. A property condition report is not a requirement, though it may be a valuable tool to "remind" a Seller to disclose all he knows about the property; assist the purchaser in ascertaining the condition of the property; and absolve the estate agent from any allegation of any non-compliance of Section of the Code of Conduct. However, use of such a report is not without problems - The "Property Condition Report" is generally obtained at the time the mandate is granted. A lot can happen to a property between the grant of the mandate and the sale. Furthermore, what if the estate agent who obtained the mandate is given an authority or instruction to appoint sub-agents, or to multi list the property? In order to avoid any confusion, it is probably necessary to record in a mandate agreements that the seller accepts and acknowledges that it is his duty and responsibility to disclose any latent defects that he is aware of, and / or any issue regarding the property which may be of relevance to the Purchaser in any sale agreement that he may conclude, and that the Seller therefore absolves the estate agent from any liability arising from any claim wherein it is alleged that there was a duty on the estate agent to disclose such defects to the eventual purchaser of the property. 3 P a g e

4 In addition, most sale agreements contain an acknowledgment by the purchaser to the effect that the purchaser has inspected the property and accepts it together with its fixtures and fittings in the condition that the saw them at the time of conclusion of the agreement, etc. It is a good idea to request a purchaser to initial next to this section of the sale agreement i.e. the clause that refers to the fact that the purchaser is buying the property in the condition that he saw it, and where he acknowledges having inspected the property and its fixtures and fittings. From an estate agent's perspective, the agent would have, in making his assessment of the property and its likely selling price, noted the existence of any patent defects which would have affected the valuation of the property and in all likelihood the estate agent would have, or should have, enquired of the seller whether there is anything about the property that could possibly affect its nature or value which is not readily visible. The estate agent can then use these notes taken at the time of the inspection of the property to disclose any facts that could be material to a prospective purchaser. There is however no need for the estate agent to take over the seller's obligation to disclose these facts himself to the purchaser or anything contained in a property condition report- If the estate agent takes on the obligation of disclosure from the seller, then the estate agent bears the responsibility for the disclosure to the purchaser. And if the estate agent makes any representations about the property and its condition to the purchaser, the estate agent runs the risk of the purchaser not inspecting a property properly and placing reliance on the estate agent exclude or limit the operation of the voetstoots clause - which is undesirable 4 P a g e

5 Definitions applicable to this Part (1) In this Part, when used with respect to any goods, component of any goods, or services- (a) defect means- (i) any material imperfection in the manufacture of the goods or components, or in performance of the services, that renders the goods or results of the service less acceptable than persons generally would be reasonably entitled to expect in the circumstances; or (b) (c) (d) (ii) any characteristic of the goods or components that renders the goods or components less useful, practicable or safe than persons generally would be reasonably entitled to expect in the circumstances; failure means the inability of the goods to perform in the intended manner or to the intended effect; hazard means a characteristic that- (i) has been identified as, or declared to be, a hazard in terms of any other law; or (ii) presents a significant risk of personal injury to any person, or damage to property, when the goods are utilized; and unsafe means that, due to a characteristic, failure, defect or hazard, particular goods present an extreme risk of personal injury or property damage to the consumer or to other persons. Consumer s rights to demand quality service (1) When a supplier undertakes to perform any services for or on behalf of a consumer, the consumer has a right to- (a) the timely performance and completion of those services, and timely notice of any unavoidable delay in the performance of the services; (b) the performance of the services in a manner and quality that persons are generally entitled to expect; (c) the use, delivery or installation of goods that are free of defects and of a quality that persons are generally entitled to expect, if any such goods are required for performance of the services; and (d) the return of any property or control over any property of the consumer in at least as good a condition as it was when the consumer made it available to the supplier for the purpose of performing such services, having regard to the circumstances of the supply, and any specific criteria or conditions agreed between the supplier and the consumer before or during the performance of the services. (2) If a supplier fails to perform a service to the standards contemplated in subsection (1), the consumer may require the supplier to either- (a) remedy any defect in the quality of the services performed or goods supplied; or (b) refund to the consumer a reasonable portion of the price paid for the services performed and goods supplied, having regard to the extent of the failure. 5 P a g e

6 Consumer s rights to safe, good quality goods (1) This section does not apply to goods bought at an auction, as contemplated in section 45. (2) Except to the extent contemplated in subsection (6) every consumer has aright to receive goods that- (a) are reasonably suitable for the purposes for which they are generally intended; (b) are of good quality, in good working order and tree of any defects; (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; and (d) comply with any applicable standards set under the Standards Act, 1993 (Act No. 29 of 1993), or any other public regulation. (3) In addition to the right set out in subsection (2)(a), if a consumer has specifically informed the supplier of the particular purpose for which the consumer wishes to acquire any goods, or the use to which the consumer intends to apply those goods, and the supplier- (a) ordinarily offers to supply such goods; or (b) acts in a manner consistent with being knowledgeable about the use of those goods, the consumer has a right to expect that the goods are reasonably suitable for the specific purpose that the consumer has indicated. (4) In determining whether any particular goods satisfied the requirements of subsection (2) or (3), all of the circumstances of the supply of those goods must be considered, including but not limited to- (a) the manner in which, and the purposes for which, the goods were marketed, packaged and displayed, the use of any trade description or mark, any instructions for, or warnings with respect to the use of the goods; (b) the range of things that might reasonably be anticipated to be done with or in relation to the goods; and (c) the time when the goods were produced and supplied. (5) For greater certainty in applying subsection (4)- (a) it is irrelevant whether a product failure or defect was latent or patent, or whether it could have been detected by a consumer before taking delivery of the goods; and (b) a product failure or defect may not be inferred in respect of particular goods solely on the grounds that better goods have subsequently become available from the same or any other producer or supplier. (6) Subsection (2)(a) and (b) do not apply to a transaction if the consumer- (a) has been expressly informed that particular goods were offered in a specific condition; and (b) has expressly agreed to accept the goods in that condition, or knowingly acted in a manner consistent with accepting the goods in that condition. 6 P a g e

7 Implied warranty of quality (1) In any transaction or agreement pertaining to the supply of goods to a consumer there is an implied provision that the producer or importer, the distributor and the retailer each warrant that the goods comply with the requirements and standards contemplated in section 55, except to the extent that those goods have been altered contrary to the instructions, or after leaving the control, of the producer or importer, a distributor or the retailer, as the case may be. (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. (3) If a supplier repairs any particular goods or any component of any such goods, and within three months after that repair, the failure, defect or unsafe feature has not been remedied, or a further failure, defect or unsafe feature is discovered, the supplier must- (a) replace the goods; or (b) refund to the consumer the price paid by the consumer for the goods. (4) The implied warranty imposed by subsection (1), and the right to return goods set out in subsection (2), are each in addition to- (a) any other implied warranty or condition imposed by the common law, this Act or any other public regulation; and (b) any express warranty or condition stipulated by the producer or importer, distributor or retailer, as the case may be. 7 P a g e

Section of the Code of Conduct + CPA = Questions about the appropriateness of the "Voetstoots" clause =

Section of the Code of Conduct + CPA = Questions about the appropriateness of the Voetstoots clause = Section 4.1.1 of the Code of Conduct + CPA = Questions about the appropriateness of the "Voetstoots" clause = the "birth" of the "Property Condition Report" = CONFUSION Introduction Section 4.1.1 of the