Legal Articles

Agreements/contracts are part of everyday life and each time parties transact, it would be the culmination of their consensus to do so. With the exception of a few (alienation of land, deed of suretyship), contracts may legally be concluded verbally. However, it is advisable for parties to reduce agreements into writing for ease of reference as it is much easier to resolve disputes by referring to the terms of the contract itself.

It often happens that where verbal contracts are in dispute, some parties misrepresent facts in order for prospects to tilt in their favour. It is against this backdrop that we strongly advise parties to reduce the terms and conditions of their agreements into writing.

Most contracts are usually specific about the time-frame upon which they will be in force and effect. Some contracts are short-term while some are long-term and yet still, some are in force only until the completion of a certain project. The termination of an agreement ought to be done according to the terms of that particular agreement, whose provisions must provide for how the contract may be terminated. In the event that either of the parties to the contract terminates it in a way that is not consistent with the provisions of the contract, without condonation from the other party, such termination will be unlawful and may be the subject of a claim if the other party suffers damages/loss. It is therefore imperative that parties terminate their agreements as per the provisions of the agreement.

With regard to consumer agreements, Section 14 read with Regulation 5 of the Consumer Protection Act 68 of 2008 (CPA) provides for the cancellation thereof and the maximum period of a fixed-term contract. As per the regulations, fixed-term contracts may not exceed 24 months unless the parties expressly agree to an extended period and the supplier is able to show that it will be to the financial benefit of the consumer.

5 (1)         For purposes of section 14(4)(a) of the Act, the maximum period of a fixed-term consumer agreement is 24 months from the date of signature by the consumer –

(a) unless such longer period is expressly agreed with the consumer and the supplier can show a demonstrable financial benefit to the consumer.

Upon the expiration of a fixed-term contract, the consumer may cancel the contract without penalty or charge, but remains liable for any outstanding amounts that may have been owing during the currency of the contract. The consumer may also cancel the contract before the expiration of the period albeit upon giving 20 business days’ notice to the supplier.

On the other hand, the supplier may cancel the agreement upon giving 20 business days’ notice to the consumer should there be a material failure by the consumer to comply with the agreement. It must be noted further, that the 20-day notice must be in writing. In the event that the consumer does not issue a written notice for the termination of the fixed-term contract, the agreement will automatically continue on a month-to-month basis. It is important therefore, to ensure that upon the expiration of a fixed-term contract, it is cancelled in writing. Section 14 of the CPA however, does not apply to transactions between juristic persons regardless of their annual turnover or asset value.

At Van Deventer and Van Deventer Incorporated, we assist with consumer protection matters and contracts amongst a wide array of other legal services. Our services are comprehensive and professional.

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