1. THE CONSUMER
FINANCIAL & CONTRACTUAL ASPECTS OF WHICH CONSUMERS SHOULD
TAKE NOTE OF
Contracts
• A legally valid agreement between two or more parties where an offer is made
and its terms and conditions or acceptive the right and obligations of each
party are set out in the contract
• Both parties must give something of value and receive something of value
• add agreement can be reached between two or more parties in three ways:
→ Oral agreement
→ Silent agreement
→ Written contract: Legally binding agreement between two or more parties
is put in writing and signed by all parties in front of witnesses
Requirements for valid contracts
• All parties must consent to the contract/ agreement, and there must be an
offer and an acceptance of the offer
• The parties entering the contract must have the capacity to contract e.g. must
be older than 18 years old
• The agreement cannot be illegal e.g. selling unpolished diamonds without a
license
• The contract must comply with the necessary legal formalities e.g. the
document must be correctly signed and initialled by all parties
• Agreement and consent must be voluntary; no party may be forced into the
contract
• it must be possible to perform the contractual obligations
Breach of contract
• When one party fails to perform the obligations specified in the contract that
party breaches the contract
• Consequences of breach of contract:
→ the court can declare the party guilty for failure to keep to the agreement
and a fine or jail sentence may be imposed
→ the court can sue the guilty party for damages
→ an interdict can be obtained to prevent the guilty party from continuing
with his or her work
→ the contract can be cancelled or declared void
Types of Contracts
1. Employment contracts
• An agreement between an employer and an employee
• A legal contract and the terms and conditions or legally binding
• It is too that vantage of both the employer and employee and protects
both parties in terms of contractual obligations and service conditions
, • Must be signed by the employer the employee and two witnesses
2. Insurance policies
• An agreement between a consumer and an insurance company
• The insurance company undertakes to compensate the consumer in the
case of loss or damage to the insured goods
• The consumer undertakes to pay a monthly sum or premium to the
insurer
Examples of insurance policies:
• Household: The consumer is insured against loss or damage to property and
house contents
• Motor vehicle: The consumer is insured against loss or damages to his or her
vehicle
• Medical fund/hospital plan: the consumer is insured against medical costs
due to illness and or hospitalisation
• Life: We need consumer dies a specific amount of money is paid out by the
insurer to the beneficiary
3. Credit agreements
• A contract between the consumer and a credit provider
• The consumer is offered a loan to buy goods on credit and undertakes to
pay the full amount as well as interest in the form of monthly instalments
over a fixed number of months
Examples of credit agreement transactions:
• Mortgage/ home loan:
- The money borrowed from a bank or financial institution to buy a property
- The consumer and the bank or financial institution enter into an agreement
- The bank or financial institution pays the full purchase price of a property
on behalf of the consumer
- The consumer pays back the full amount with interest over a fixed number
of years in the form of fixed installments
- The consumer ‘owns’ the property from the data contract is signed but it
becomes the legal owner only when the home loan has been paid in full
• Bank loan:
- Agreement entered into between a bank and a consumer
- The bank lends money to the consumer who undertakes to pay back the
full amount of interest in fixed installments over a fixed period
• Hire purchase installment sale contracts:
- Entered into when buying more costly consumer goods such as
refrigerators, stoves and furniture
- An agreement or contract is entered into between the consumer and the
retailer from whom the goods are bought
- The consumer pays a deposit and then a number of installments over fixed
period until the goods are paid in full
- The consumer receives the goods after signing the contract and paying the
deposit
, - Ownership of the goods is only transferred once the final payment has
been made until then, the buyer only hires their goods
- The retailer is entitled to take back the goods should the consumer fail to
fulfill the terms of the contract
• Layby:
- An agreement or contract entered into between a consumer and a retailer
from whom the goods are bought
- The consumer pays a deposit and a number of installments over a fixed
period until the full price of the article has been paid
- No additional costs or interest has to be paid
- the consumer only receives the article once the full amount has been paid
• Credit accounts at shops:
- An agreement or contract is entered into between the consumer and the
retailer
- An open-end / revolving credit account is set up with a fixed payment
period
- The consumer can continue to buy an account up to a fixed limit
- The consumer then pays a minimum monthly account
- Interest is charged on the outstanding balance and additional interest is
charged if the minimum amount is not received by the payment date
- The consumer receives the goods directly after purchase
4. Leases
• An agreement or contract between lessor (owner) and a lessee (tenant)
• The lessee takes on the lease of the property for minimum period at a
fixed rate
• The lease is a legal document specifying the conditions of the lease as
well as the right and obligations of both the lessor an the lessee
5. Purchase and sale agreements
• A legal contract between a sailor and a buyer of a property
• The offer to purchase becomes a legal purchase and a sale agreement
as soon as the seller accepts and signs the written offer of the buyer
• Legally the buyer and the seller must then comply with the terms and
conditions of the contract
6. Gymnasium membership contracts, cell phone service contracts, newspaper
or internet subscriptions
• All agreements between the consumer and the creator provider for a
fixed number of months
7. Business contracts / partnership agreements
• An agreement between two or more people wanting to start a business
• A business contract must be drafted very carefully in order to protect all
parties involved
• a partnership agreement should clearly specify the following:
, - The amount of capital, assets or expertise each partner will
contribute to the business
- The share in profit or loss of each partner
- The role and responsibilities of each partner
- Terms and conditions that will apply to the termination of the
contract
Cooling-off Period
• The period of the signing a contract or agreement within which the consumer
can change his or her mind and cancel the contract or agreement without
reason or penalty
• The Consumer Protection Act allows the consumer a cooling off period of five
days in which to cancel a contract or agreement resulting from direct
marketing (a business approaches the consumer personally by mail or
telephone)
- The supplier must return any payments received in terms of the
agreement to the consumer within 15 days of cancellation
- If the consumer received any goods they must return it to the supplier
• The Alienation of Land Act allows the buyer of property a cooling off period of
five days of designing a purchase and sale agreement
• The National Credit Act allows the consumer to terminate a credit agreement
with respect to a lease on installment agreement within five days if the
agreement occurred in any other place except the registered business
premises of the credit provider
- If the consumer received any good there must be returned to the credit
provider and the credit provider must return any payment received from
the consumer within 7 days
Exclusion Clauses
• Contract provisions in which a parties liability is indemnified altered or limited
should the party not fulfil his or her obligations in terms of the contract
Legal exclusion clauses
• In some standard contract sale closes that don't apply to any of the parties
and so they must be excluded
• Both parties must accept their exclusion and it must not be detrimental to any
one of the parties
Illegal exclusion clauses
• Exclusion clauses can be unfair or unreasonable
• If the court finds that an exclusion clause was unfair or unreasonable it can be
declared void and thus unenforceable
• The content of a contract cannot be changed by only one party, all must agree
to the changes
Unfair Business Practices
• Unfair, unreasonable or unjust treatment of the consumer by a supplier
FINANCIAL & CONTRACTUAL ASPECTS OF WHICH CONSUMERS SHOULD
TAKE NOTE OF
Contracts
• A legally valid agreement between two or more parties where an offer is made
and its terms and conditions or acceptive the right and obligations of each
party are set out in the contract
• Both parties must give something of value and receive something of value
• add agreement can be reached between two or more parties in three ways:
→ Oral agreement
→ Silent agreement
→ Written contract: Legally binding agreement between two or more parties
is put in writing and signed by all parties in front of witnesses
Requirements for valid contracts
• All parties must consent to the contract/ agreement, and there must be an
offer and an acceptance of the offer
• The parties entering the contract must have the capacity to contract e.g. must
be older than 18 years old
• The agreement cannot be illegal e.g. selling unpolished diamonds without a
license
• The contract must comply with the necessary legal formalities e.g. the
document must be correctly signed and initialled by all parties
• Agreement and consent must be voluntary; no party may be forced into the
contract
• it must be possible to perform the contractual obligations
Breach of contract
• When one party fails to perform the obligations specified in the contract that
party breaches the contract
• Consequences of breach of contract:
→ the court can declare the party guilty for failure to keep to the agreement
and a fine or jail sentence may be imposed
→ the court can sue the guilty party for damages
→ an interdict can be obtained to prevent the guilty party from continuing
with his or her work
→ the contract can be cancelled or declared void
Types of Contracts
1. Employment contracts
• An agreement between an employer and an employee
• A legal contract and the terms and conditions or legally binding
• It is too that vantage of both the employer and employee and protects
both parties in terms of contractual obligations and service conditions
, • Must be signed by the employer the employee and two witnesses
2. Insurance policies
• An agreement between a consumer and an insurance company
• The insurance company undertakes to compensate the consumer in the
case of loss or damage to the insured goods
• The consumer undertakes to pay a monthly sum or premium to the
insurer
Examples of insurance policies:
• Household: The consumer is insured against loss or damage to property and
house contents
• Motor vehicle: The consumer is insured against loss or damages to his or her
vehicle
• Medical fund/hospital plan: the consumer is insured against medical costs
due to illness and or hospitalisation
• Life: We need consumer dies a specific amount of money is paid out by the
insurer to the beneficiary
3. Credit agreements
• A contract between the consumer and a credit provider
• The consumer is offered a loan to buy goods on credit and undertakes to
pay the full amount as well as interest in the form of monthly instalments
over a fixed number of months
Examples of credit agreement transactions:
• Mortgage/ home loan:
- The money borrowed from a bank or financial institution to buy a property
- The consumer and the bank or financial institution enter into an agreement
- The bank or financial institution pays the full purchase price of a property
on behalf of the consumer
- The consumer pays back the full amount with interest over a fixed number
of years in the form of fixed installments
- The consumer ‘owns’ the property from the data contract is signed but it
becomes the legal owner only when the home loan has been paid in full
• Bank loan:
- Agreement entered into between a bank and a consumer
- The bank lends money to the consumer who undertakes to pay back the
full amount of interest in fixed installments over a fixed period
• Hire purchase installment sale contracts:
- Entered into when buying more costly consumer goods such as
refrigerators, stoves and furniture
- An agreement or contract is entered into between the consumer and the
retailer from whom the goods are bought
- The consumer pays a deposit and then a number of installments over fixed
period until the goods are paid in full
- The consumer receives the goods after signing the contract and paying the
deposit
, - Ownership of the goods is only transferred once the final payment has
been made until then, the buyer only hires their goods
- The retailer is entitled to take back the goods should the consumer fail to
fulfill the terms of the contract
• Layby:
- An agreement or contract entered into between a consumer and a retailer
from whom the goods are bought
- The consumer pays a deposit and a number of installments over a fixed
period until the full price of the article has been paid
- No additional costs or interest has to be paid
- the consumer only receives the article once the full amount has been paid
• Credit accounts at shops:
- An agreement or contract is entered into between the consumer and the
retailer
- An open-end / revolving credit account is set up with a fixed payment
period
- The consumer can continue to buy an account up to a fixed limit
- The consumer then pays a minimum monthly account
- Interest is charged on the outstanding balance and additional interest is
charged if the minimum amount is not received by the payment date
- The consumer receives the goods directly after purchase
4. Leases
• An agreement or contract between lessor (owner) and a lessee (tenant)
• The lessee takes on the lease of the property for minimum period at a
fixed rate
• The lease is a legal document specifying the conditions of the lease as
well as the right and obligations of both the lessor an the lessee
5. Purchase and sale agreements
• A legal contract between a sailor and a buyer of a property
• The offer to purchase becomes a legal purchase and a sale agreement
as soon as the seller accepts and signs the written offer of the buyer
• Legally the buyer and the seller must then comply with the terms and
conditions of the contract
6. Gymnasium membership contracts, cell phone service contracts, newspaper
or internet subscriptions
• All agreements between the consumer and the creator provider for a
fixed number of months
7. Business contracts / partnership agreements
• An agreement between two or more people wanting to start a business
• A business contract must be drafted very carefully in order to protect all
parties involved
• a partnership agreement should clearly specify the following:
, - The amount of capital, assets or expertise each partner will
contribute to the business
- The share in profit or loss of each partner
- The role and responsibilities of each partner
- Terms and conditions that will apply to the termination of the
contract
Cooling-off Period
• The period of the signing a contract or agreement within which the consumer
can change his or her mind and cancel the contract or agreement without
reason or penalty
• The Consumer Protection Act allows the consumer a cooling off period of five
days in which to cancel a contract or agreement resulting from direct
marketing (a business approaches the consumer personally by mail or
telephone)
- The supplier must return any payments received in terms of the
agreement to the consumer within 15 days of cancellation
- If the consumer received any goods they must return it to the supplier
• The Alienation of Land Act allows the buyer of property a cooling off period of
five days of designing a purchase and sale agreement
• The National Credit Act allows the consumer to terminate a credit agreement
with respect to a lease on installment agreement within five days if the
agreement occurred in any other place except the registered business
premises of the credit provider
- If the consumer received any good there must be returned to the credit
provider and the credit provider must return any payment received from
the consumer within 7 days
Exclusion Clauses
• Contract provisions in which a parties liability is indemnified altered or limited
should the party not fulfil his or her obligations in terms of the contract
Legal exclusion clauses
• In some standard contract sale closes that don't apply to any of the parties
and so they must be excluded
• Both parties must accept their exclusion and it must not be detrimental to any
one of the parties
Illegal exclusion clauses
• Exclusion clauses can be unfair or unreasonable
• If the court finds that an exclusion clause was unfair or unreasonable it can be
declared void and thus unenforceable
• The content of a contract cannot be changed by only one party, all must agree
to the changes
Unfair Business Practices
• Unfair, unreasonable or unjust treatment of the consumer by a supplier
