When suppliers take a look at their current contracts with consumers it is safe to say that most of them will need complete redrafting to comply with the Consumer Protection Act of 2008 (CPA). Listed below are some of the key provisions of the CPA. The rest of the CPA is also relevant, but is only applicable to specific terms.
Section 3: Purpose of the CPA
The documents must give effect to the general purpose of the CPA which is, broadly speaking, to:
- protect the illiterate consumer,
- promote consumer choice, and
- reduce unfair and unreasonable business practices.
Section 13: Right of consumer to select suppliers
A consumer must not be forced to purchase other products from the supplier, unless it is showed that the consumer will greatly benefit from it. If there are such terms, they must be redrafted to show benefits to the consumer or must be deleted entirely.
Section 22: Plain Language
The documents need to be redrafted into plain language. This is imperative as consumers can have a contract invalidated if they could not understand the contract. The documents need to be able to be understood by a consumer with average literacy skills, minimum experience as a consumer in the relevant field and there must be tools in place to help a consumer understand the document better. The use of definitions, clause headings and explanatory terms in brackets can be used. Michalsons has developed various techniques to do this and have compiled plain language standard terms, and plain language conversion query sheets that we use.
Sections 48 and 49: Unfair and unreasonable terms
There is an entire list of terms that are deemed to be unfair and unreasonable. The document needs to be edited so that it does not contain any of these terms. In addition to this all terms that limits the supplier’s risk, creates liability and gives rise to unusual or unexpected risk must be in plain and understandable language and the consumer’s attention must be drawn to it.
Section 51: Prohibited terms
There is a list of terms in the CPA that are completely prohibited. None of these may appear in any document and if they do the entire document can be declared void. The most relevant of these are that a contract cannot deprive a consumer of any of their rights in terms of the CPA. The CPA makes provision, for example, for the right of a consumer to return goods and to a cooling off period during which a consumer may cancel a contract. Clauses limiting or excluding this right cannot be included in a contract and need to be completely deleted or, where relevant, be redrafted in order to comply with the CPA.
Is it worth the time and effort?
Compliance with the Consumer Protection Act is a necessity for all suppliers to ensure that they:
- keep their current client base,
- prevent litigation,
- protect their reputation and
- keep up with competitors.
The time to review consumer contracts is now, as it will save time, money and effort in the future.