Chill – Out: ‘the cooling-off right’

South African Law does not allow any party to a valid contract to unilaterally set aside a contract simply because she changed her mind. The need to protect vulnerable purchasers, however, has received much attention and has necessitated the implementation of the “cooling-off right”.

The National Credit Act No. 34 of 2005; the Alienation of Land Act No. 68 of 1981; and the Consumer Protection Act No. 08 of 2008, include a few instances where the cooling-off period is provided for. This article will focus primarily on the operation of the cooling-off period in relation to these Acts.

The National Credit Act

The National Credit Act limits the cooling-off right to leases and instalment agreements entered into at a location other than the registered business premises of the credit provider.

 

Section 121 of the Act stipulates the operation of the cooling-off right as follows:

(2) A consumer may terminate a credit agreement within five business days (excluding weekends and public holidays) after the date on which the agreement was signed by the consumer, by-

(a) delivering a notice in the prescribed manner (in writing, delivered by hand, fax, email or registered mail)to the credit provider; and

(b) tendering the return of any money or goods, or paying in full for any services, received by the consumer in respect of the agreement.

(3) When a credit agreement is terminated in terms of this section, the credit provider

(a) must refund any money the consumer has paid under the agreement within seven business days after the delivery of the notice to terminate; and

(b) may require payment from the consumer for-

(i) the reasonable cost of having any goods returned to the credit provider and restored to saleable condition; and

(ii) a reasonable rent for the use of those goods for the time that the goods were in the consumer’s possession, unless those goods are in their original packaging and it is apparent that they have remained unused.

 

Consumers are well advised to ensure that if they are going to exercise their cooling-off right, it must be done in good faith. In this regardconsumers mustnot use the goods and be cautious to keep the original packaging. When the consumer returns the goods to the credit provider its is advised that she ask a representative to acknowledge in writing that the goods were returned, the condition in which they were returned as well as the time and date of return.

 

The Alienation of Land Act

Section 2(2A) obliges the drafter of a written contract to ensure that the contract informs a reasonable reader in the purchaser’s position that he has the right to terminate the contract (the cooling-off right):

2(2A) The deed of alienation shall contain the right of a purchaser or prospective purchaser to revoke the offer or terminate the deed of alienation in terms of section 29A.

Section 29A stipulates the following:

(1) Subject to subsection (5), a purchaser or prospective purchaser of land may within five days after signature by him or her, or by his or her agent acting on his or her written authority, of-

(a) an offer to purchase land; or

(b) a deed of alienation in respect of land,

revoke the offer or terminate the deed of alienation, as the case may be, by written notice delivered to the seller or his or her agent within that period.

However this obligation, once fulfilled by the seller, confers a right upon the purchaser. This right has a finite life, namely five days calculated from the day succeeding that on which the contract is signed but excluding weekends and public holidays:

s29A(2) The period of five days contemplated in subsection (1) shall be calculated with the exclusion of the day upon which the offer was made or the deed of alienation was entered into, as the case may be, and of any Saturday, Sunday or public holiday.

This fixed lifespan is in no way dependent on or affected by a purchaser’s knowledge of the right. No statutory provision is made for any extension of this period, whether by agreement inter partes or condonation by a competent court or otherwise. The cooling-off right lapses at the expiration of the five days if it is not exercised properly or at all. [1]

Furthermore the written notice must be signed by the purchaser or his or her agent acting on his or her written authority; must identify the offer that is being revoked, and; must be unconditional. S29A(3)(a-c).0

Where an offer is revoked the seller shall refund the full amount of any deposit he received to the purchaser within 10 days of the date on which the notice was delivered to the seller or his or her agent. S29A(4)

Any person wanting to evoke their cooling-off right must note that the five-day cooling-off period will not apply if:

s29A(5)[2]

(a) the purchase price of the land,or the price offered for the land by the prospective purchaserexceeds R250 000 or such higher amount as the Minister may prescribe in order to counter the effect of inflation;

(b) the purchaser or prospective purchaser is a trust or a person other than a natural person;

(c) the purchaser or agent has purchased the land at a publicly advertised auction;

(d) the seller and purchaser have previously entered into a deed of alienation of the same land on substantially the same terms;

(e) the purchaser or prospective purchaser has reserved the right to nominate or appoint another person to take over the rights and obligations of the purchaser in the offer or deed of alienation in question;

(f) the purchaser purchases the land by the exercise of an option which was open for exercise for a period of at least five days

The Act goes on to stipulate that neither the seller nor his agent shall be entitled to any remuneration or damages payable in respect of an offer or deed of alienation which the purchaser or prospective purchaser has revoked or terminated. S29A(6)

A condition in the offer to purchase, imposing a penalty or fee on the purchaser should he or she exercise the cooling-off right shall be void. S29A(7)(a)

Similarly, any waiver by a purchaser of the rights conferred upon him or her shall also be void. S29A(7)(b)

 

The Consumer Protection Act

This Act tailors the application of the cooling-off right to the specific instance of direct marketing. The Act recognizes the impulsive-gene and recommends that the person who is directly marketing any goods or services, and concludes a transaction or agreement, must inform the consumer of the consumer’s right to rescind the agreement. (s32).

A consumer may rescind a transaction resulting from direct marketing without reason or penalty, by notice to the supplier in writing, or another recorded form such as email or fax. Rescission by the consumer must occur within five days after:

(i) the conclusion of the transaction or agreement; or

(ii) the delivery of the goods that were the subject of the transaction. (s16 (3)(a-b))

Upon a valid rescission in accordance with the cooling-off right, the supplier bears the onus of returning any payment received from the consumer in terms of the transaction within 15 business days after:

(i) receiving notice of the rescission, where no goods have been received by the consumer in terms of the transaction; or

(ii) receiving from the consumer any goods supplied in terms of the transaction. (s 16 (4)(a)).

Concluding remarks:

While the cooling-off right is an indomitable weapon in the consumer’s arsenal, it must be evoked with caution and strict compliance with the provisions of the relevant rules. In each of the above-mentioned Acts, the cooling-off right shall be valid only if it complies with the requirements set forth therein. Its provisions are couched in such instructive and imperative language so as to reflect a clear legislative intention that non-compliance with its peremptory provisions renders invalid the exercise of the cooling-off right. For instance, the fact that a time period has been stipulated within which to evoke the right is an example of the peremptory nature of this right. None of the above-mentioned Acts make provision for the extension of the cooling-off period which points succinctly to the fact that the intention of the legislature was to render the right applicable for a strict period of five days. Consumers must accordingly be aware of their responsibility to transact with caution and sobriety. 

 

Written by: Quraysha Mohamed (Candidate Attorney)

 

[1]Fareed Moosa: Cooling off — The Gowar Investments case analysed — De Rebus Nov 2009

 

[2]paraphrased from Act 

  • Added 24 November 2010

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