On 23 October 2012 Justice Dhaya Pillay handed down a judgment in the Durban High Court, which might prove to be a victory in the war against legalese and unfair contract terms.

one of the biggest questions was whether Mr  Dlamini  understood and knew of the terms of the credit agreement

The facts

Mr Mbuyiseni Dlamini bought second-hand motor vehicle on credit from a well-known South African bank, through a second hand car dealership in Pinetown. Four days later he had it towed back to the dealership, because it had a mechanical failure and could not be driven. He asked for a refund of the deposit.

The bank’s attorney sent a S129 Notice, in terms of the National Credit Act (NCA) (to an incorrect address) and issued summons shortly afterwards. They claimed for return of the vehicle, legal costs and the costs of locating, removing, storage and disposal of the vehicle.

The bank argued that Mr Dhlamini did not send his termination notice in the correct manner or to the correct fax number as set out in the credit agreement and that the termination was a voluntary surrender under the NCA.

Mr Dlamini, in turn, stated that the terms were never explained to him and that he did not know about the formalities under the credit agreement.

So one of the biggest questions was whether Mr  Dlamini  understood and knew of the terms of the credit agreement. Mr Dlamini was functionally illiterate, as many South Africans today are, and he paid little attention to the payment repayment plan documents. Could he be bound to an agreement he could not read and did not understand?

What did the judge say?

For lawyers and lay persons alike, the form of the bank’s standard agreement is an unappetising formidable read.

Despite the bank’s arguments that Mr Dlamini:

  • should have been more careful before signing the document (caveat subscriptor); and
  • acted in a way that showed that he agreed to the terms (quazi mutual assent)

the judge relied on the principles of the Constitution and other pieces of legislation (including the Consumer Protection Act and NCA) to find that, in this case, it would amount to unfair discrimination to bind Mr Dlamini to the contract terms.  He also raised the fact that the NCA gives a consumer the right to documents in their official language and (if no form is prescribed) in plain language.

So what about an illiterate consumer?

The judge found that the law gives a consumer the right “to be informed by reasonable means of the material terms of the documents he signs.”  What is reasonable will depend among other things on:

  • the industry;
  • regional circumstances or geographical location;
  • price;
  • nature of the goods and services; and
  • class of consumers likely to contract for them.

The bottom line

The creditor must prove that it took reasonable measures to inform the consumer of the material terms of the agreement and should have ensured that their documents comply with the law.

Since the bank’s credit agreement was drafted in favour of the bank and did not contain all the consumer’s legal rights, it aimed to defeat the purpose of the NCA. The whole agreement was found to be unlawful and was set aside.

What does this mean for suppliers?

If you are a supplier of goods and services on cash or on credit, you need to make sure:

  • your agreements comply with the law;
  • you are not purposefully misleading the consumer or hiding their rights from them;
  • every document you give to a consumer is in plain and understandable language; and
  • that you take steps to explain the important terms to your customers, if they are not able to read the document or if they cannot understand it completely.

How can we help you?

Our team of experts can:

  1. make sure that your documents comply with the latest law and that your documents are in plain language;
  2. provide you with various plain language and consumer protection services;
  3. help you train your staff on the Consumer Protection Act and plain language; and
  4. draft documents for you that are in plain language and that comply with the latest law.

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