Cancellations in the time of COVID-19

Consumer Protection Act

When can the supplier charge a cancellation penalty?

These rules only apply when the CPA is (fully) applicable, i.e. when the consumer is:

  • an individual or
  • a juristic person with a turnover and asset value of under R2m

 

  1. In terms of section 14:

Requirements:

  • contract for a fixed term (e.g. 19 days / 24 months / from 1 January 2020 until my daughter graduates with LLB)
  • both parties to the contract can’t be juristic persons (e.g. CC, company, partnership, association, trust)
  • the consumer must cancel OR the supplier can cancel due to breach of contract by the consumer (e.g. didn’t pay deposit on time)

 

How to calculate the cancellation penalty:

  • it can only be for goods or services already supplied or for discounts granted to the consumer
  • you can take the following factors into account

according to regulation 5(2)

  • industry practice
  • the likelihood of getting a replacement for the consumer
  • the amount the consumer owes at the date of cancellation
  • the duration & value of the contract
  • the length of notice given by the consumer
  • the value of any goods the consumer keeps after cancellation (e.g. your travel advice) and the value of any goods the consumer returns to the supplier
  • losses or benefits of the consumer as a result of the transaction
  • amount must be reasonable (from a reasonable consumer’s perspective)
  • even if there are several suppliers affected, only one cancellation fee can be charged
  • the consumer remains liable for all amounts due to the supplier up to the date of cancellation (i.e. 20 business days after the date on which the consumer tells you they need to cancel)
  • the cancellation penalty may never be 100% of the fee for the booking, it must be less than that (regulation 5(3))

 

  1. In terms of section 17:

Requirements:

  • The transaction is not a special-order package (i.e. where the holiday is customised according to the requirements of the consumer)
  • The consumer must initiate the cancellation
  • the consumer didn’t cancel due to his / her hospitalisation or death

 

How to calculate the cancellation penalty:

  • you can take the following factors into account
    • industry practice
    • the likelihood of getting a replacement for the consumer
    • the nature of the goods or services that were booked
    • the length of notice given by the consumer
  • amount must be reasonable (from a reasonable consumer’s perspective)
  • even if there are several suppliers affected, only one cancellation fee can be charged

 

  1. Can you have non-refundable tickets?

Yes, but only if the CPA doesn’t fully apply, i.e.

  • If the consumer is a juristic person with a turnover and asset value of over R2 million
  • If the transaction was concluded outside SA (i.e. the offer was made by an overseas consumer and the SA supplier accepted it)
  • Possible requirement- if there are no goods or services that would have been supplied in SA
  • AND if your contract says the tickets will be non-refundable under certain circumstances, and those circumstances apply.

 

Unless your situation meets the one of the criteria above, you will have to refund an unused ticket when the consumer requests this. You can always negotiate with the consumer and offer them a postponement or alternative booking. See above- you may also be able to deduct a cancellation penalty from the refund.

 

  1. Your obligations in terms of sections 17, 48 and 68 of the CPA

Section 17

  • If a supplier / intermediary cannot deliver the goods or services at the agreed time and place, the consumer may either accept the new time / place, or can reject the change without penalty and keep any goods already delivered without having to pay for them.

 

Section 48

A supplier / intermediary must not

  • administer a transaction in a way that is unreasonable, unfair or unjust or
  • require a consumer to waive any rights (including the right to a refund) on terms that are unfair, unreasonable or unjust.
  • If anything in your terms and conditions impose such an unfair, unreasonable or unjust condition on a consumer, it will be invalid and unenforceable, and you will be guilty of breach of the CPA with a maximum fine of R1m (or 10% of turnover, if that is the greater amount).

 

How do you evaluate fairness?

  • If the consumer gets misled or deceived, the entire transaction is regarded to be unfair.
  • If there was a contractual term that is adverse to the consumer and it was not drawn to their attention, the entire transaction is regarded as unfair
  • If the situation is excessively adverse to the consumer’s best interests, it’s unfair
  • If the situation is excessively one-sided in favour of anyone but the consumer, it’s unfair.

 

Section 68

  • A supplier may not penalise, victimise or discriminate against any consumer who enforces any right he or she has under the CPA.

 

  1. Your obligations in terms of sections 64 and 65

 

  • Any deposit paid by a consumer doesn’t belong to the intermediary or the supplier, but to the consumer
  • EXCEPT that you can deduct on the first day of the month in which the services and goods are to be supplied to the consumer, the amount necessary to pay that month’s cost of the goods and services.

 

  1. The CPA requires you to disclose your cancellation policy to all consumers upfront (before they contract with you) in terms of section 33(3).
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