As mentioned in previous articles, a requirement for a valid contract is that it must meet the principle of legality. Common law illegality has been previously discussed, whereas this article will look at the brief aspects of statutory illegality – in simple terms, for your contract to be valid, it must meet the principle of legality and not fall short of statutory illegality. The forms of transgressions which hinder statutory legality can be sub-divided into the first category where the statute directly and expressly prohibits something. The second form is where it is implied. The information below will briefly touch on the aspect related to expressly prohibited terms in a contract.
The Consumer Protection Act 68 of 2008 (the “Act”) prohibits unfair and unjust terms emphasizing the point that consumers have the right to fair, just, and reasonable terms. Specifically, s 48 states that a supplier must not:
- offer to supply, supply, or enter into an agreement to supply, any goods or services
i) at a price that is unfair, unreasonable, or unjust; or
ii) on terms that are unfair, unreasonable, or unjust.
- market any goods or services, or negotiate, enter into or administer a transaction or an agreement for the supply of any goods or services, in a manner that is unfair, unreasonable, or unjust; or
- require a consumer or other person to whom any goods or services are supplied at the direction of the consumer
i) to waive any rights; or
ii) assume any obligation; or
iii) waive any liability of the supplier, on terms that are unfair, unreasonable, or unjust, or impose any such terms as a condition of entering into a transaction.
It is useful to consider the following considerations to determine when a term is unfair –
- Is the term too one-sided or in favour of anyone other than the consumer?
- Is the term so adverse that it is inequitable?
- Was the contract that has been concluded based on the misrepresentation?
- Have the notification requirements in terms of s 49 of the Act been complied with? (s 49 of the Act deals with the notice required for certain terms and conditions)
Further, s 51 of the Act looks at transactions that are prohibited and entails briefly that a supplier must not make any agreement subject to any term or condition if it is to defeat the purposes of the Act, mislead the consumer, subject the consumer to fraudulent behaviour.
If you are a supplier or seller, knowing which terms are prohibited will save you time and effort and allow you to act proactively to avoid unnecessary disputes or delays in transactions. If you are a buyer or consumer, you may still encounter less than ideal situations despite legislation.
If you need assistance on either end of the supply chain, do not hesitate to contact us to assist you.