Fixed term contracts in terms of the Consumer Protection Act

Fixed term contracts are regulated in terms of Section 14 of the Consumer Protection Act, 68 of 2008.

The provisions of Section 14 do not apply to transactions between juristic persons (companies or close corporations) regardless of the annual turn over or asset value.

Regulation 5 states that the default maximum period for a fixed-term consumer agreement is twenty four months from 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;

b) unless differently provided for in a regulation, which provides specifications for an industry, sector, type of agreement, type of consumer;

c) on in an industry code.

Cancellation of a fixed term agreement:

Cancellation by the consumer:

Despite any provision of the consumer agreement to the contrary, the consumer may cancel that agreement upon the expiry of its fixed term, without penalty or charge.

However, the consumer remains liable to the supplier for any amounts owed to the supplier in terms of that agreement up to the date of cancellation.

The consumer may also cancel at any other time, by giving the supplier twenty business days notice in writing or other recorded manner and form, (and does not have to provide reasons for the cancellation), subject to the above, and in addition;

The supplier (i) may impose a reasonable cancellation penalty with respect to any goods supplied, services provided or discounts granted to the consumer in contemplation of the agreement enduring for its intended fixed term and (ii) must credit the consumer with any amount that remains the property of the consumer as of the date of cancellation.

Consumers who entered into a fixed term contract prior to the Act can also cancel such agreements without reason or charge, by providing twenty business days notice in writing, however the supplier can levy a reasonable cancellation penalty. Please note that there are transitional provisions contained in the Act.

Cancellation by the Supplier:

The Supplier may cancel the agreement twenty business days after giving written notice to the consumer of a material failure by the consumer to comply with the agreement, unless the consumer has rectified the failure within that time.

The Supplier must notify the consumer in writing of the impending expiry date of the fixed term agreement, not more than eighty, nor less than forty business days before the expiry date; and

(i) any material changes that would apply if the agreement is to be renewed or may otherwise continue beyond the expiry dates; and

(ii) the options available to the consumer as follows:

That on the expiry of the fixed term of the consumer agreement, it will be automatically continued on a month-to-month basis, subject to any material changes of which the supplier has given notice, as contemplated above, unless the consumer expressly –

(i) directs the supplier to terminate the agreement on the expiry date; or

(ii) agrees to a renewal of the agreement for a further fixed term.