The Consumer
Unit 1
FINANCIAL ASPECTS
CONTRACTS
● Contract- a legally valid agreement between 2 or more parties where
an offer is made and its terms and conditions are accepted.
● Both parties must give something of value and receive something of
value
● Agreements can be reached in the following ways:
○ Oral agreement
○ Silent agreement
○ Written contract = the legally binding agreement between
parties is put in writing and signed by parties in front of
witnesses. Eg. leases, hire-purchase contracts, partnership
contracts, purchase and sale agreements
REQUIREMENTS FOR VALID CONTRACTS
➤ All parties must consent to contract (offer and acceptance)
➤ Parties entering contract must have the capacity to contract-older
than 18
➤ Agreement cannot be illegal
➤ Contract must comply with legal formalities
➤ Agreement must be voluntary-not forced
➤ Must be possible to perform contractual obligations (must be
realistic)
BREACH OF CONTRACT
➔ When one party fails to perform the obligations in the contract
=breach
,Consequences of breach of contract:
➢ Jail sentence may be imposed
➢ Court can sue guilty party for damages
➢ An interdict can be obtained to prevent guilty party from continuing
with his/her work
➢ Contract can be cancelled or declared void
TYPES OF CONTRACTS
1. Employment contracts
2. Insurance policies
3. Credit agreements
4. Leases
5. Purchase and sales agreements
6. Gym membership/cell phone service/internet subscriptions
7. Business contracts/partnership agreements
1. Employment contracts
● Contract between employer and employee
● Terms and conditions are legally binding
● Of advantage to employer and employee and protects both in terms
of service conditions and contractual obligations
● Contract is signed by employer, employee, 2 witnesses
2. Insurance policies
● Contract between consumer and insurance company
○ Insurance company- undertakes to compensate the consumer
in case of loss or damage to insured goods
○ Consumer- undertakes to pay monthly sum or premium
● Examples:
➢ Household insurance
➢ Motor vehicle insurance
➢ Medical aid/hospital plan
➢ Life insurance
, 3. Credit agreements
● Contract between consumer and credit provider
● Consumer is offered a loan to buy goods on credit: undertakes to
pay full amount+interest (in monthly instalments) over a fixed numer
of months
● Examples include:
Home loan/mortgage
➢ Money borrowed from bank to buy a property
➢ Bank pays full price of a property on behalf of consumer
➢ Consumer pays back full amount with interest over a fixed number of
years
➢ Consumer ‘owns’ property from when contract is signed, but
becomes the ‘legal owner’ once home loan is paid back in full
Bank loan
➢ Agreement between bank and consumer
➢ Consumer pays back full amount with interest, in fixed instalments,
over a fixed period
Hire purchase (instalment sale)
● Agreement between consumer and retailer from whom goods are
bought
● Entered when buying more costly goods eg. refrigerators, TV’s
● Consumer pays a deposit, then number of instalments over a fixed
period until goods are paid out in full
● Consumer receives goods after signing the contract+paying deposit
● Ownership of goods only transfers once final payment is made, until
then buyer ‘hires’ the goods
● Retailer is entitled to take back goods should the consumer fail to
fulfil terms of the contract
Unit 1
FINANCIAL ASPECTS
CONTRACTS
● Contract- a legally valid agreement between 2 or more parties where
an offer is made and its terms and conditions are accepted.
● Both parties must give something of value and receive something of
value
● Agreements can be reached in the following ways:
○ Oral agreement
○ Silent agreement
○ Written contract = the legally binding agreement between
parties is put in writing and signed by parties in front of
witnesses. Eg. leases, hire-purchase contracts, partnership
contracts, purchase and sale agreements
REQUIREMENTS FOR VALID CONTRACTS
➤ All parties must consent to contract (offer and acceptance)
➤ Parties entering contract must have the capacity to contract-older
than 18
➤ Agreement cannot be illegal
➤ Contract must comply with legal formalities
➤ Agreement must be voluntary-not forced
➤ Must be possible to perform contractual obligations (must be
realistic)
BREACH OF CONTRACT
➔ When one party fails to perform the obligations in the contract
=breach
,Consequences of breach of contract:
➢ Jail sentence may be imposed
➢ Court can sue guilty party for damages
➢ An interdict can be obtained to prevent guilty party from continuing
with his/her work
➢ Contract can be cancelled or declared void
TYPES OF CONTRACTS
1. Employment contracts
2. Insurance policies
3. Credit agreements
4. Leases
5. Purchase and sales agreements
6. Gym membership/cell phone service/internet subscriptions
7. Business contracts/partnership agreements
1. Employment contracts
● Contract between employer and employee
● Terms and conditions are legally binding
● Of advantage to employer and employee and protects both in terms
of service conditions and contractual obligations
● Contract is signed by employer, employee, 2 witnesses
2. Insurance policies
● Contract between consumer and insurance company
○ Insurance company- undertakes to compensate the consumer
in case of loss or damage to insured goods
○ Consumer- undertakes to pay monthly sum or premium
● Examples:
➢ Household insurance
➢ Motor vehicle insurance
➢ Medical aid/hospital plan
➢ Life insurance
, 3. Credit agreements
● Contract between consumer and credit provider
● Consumer is offered a loan to buy goods on credit: undertakes to
pay full amount+interest (in monthly instalments) over a fixed numer
of months
● Examples include:
Home loan/mortgage
➢ Money borrowed from bank to buy a property
➢ Bank pays full price of a property on behalf of consumer
➢ Consumer pays back full amount with interest over a fixed number of
years
➢ Consumer ‘owns’ property from when contract is signed, but
becomes the ‘legal owner’ once home loan is paid back in full
Bank loan
➢ Agreement between bank and consumer
➢ Consumer pays back full amount with interest, in fixed instalments,
over a fixed period
Hire purchase (instalment sale)
● Agreement between consumer and retailer from whom goods are
bought
● Entered when buying more costly goods eg. refrigerators, TV’s
● Consumer pays a deposit, then number of instalments over a fixed
period until goods are paid out in full
● Consumer receives goods after signing the contract+paying deposit
● Ownership of goods only transfers once final payment is made, until
then buyer ‘hires’ the goods
● Retailer is entitled to take back goods should the consumer fail to
fulfil terms of the contract
