Know Your Rights: The Cooling-off period and how it affects you as a consumer



By Mohamed Raees Hussain | Attorney: Conveyancing Division

applying-for-credit

The feeling of regret and despair after spending hard earned money or committing to monthly payments in terms of a contractual obligation is something many people can relate to, and as such, the question often asked by consumers is whether goods can be returned after being purchased without it being defective and whether a contract can be cancelled after being entered into.

The simple answer to this question is, yes. As a consumer, you have a right which allows for the return of goods and the cancellation of a contract within a certain period of time with no repercussions for reneging on the obligations arising therefrom. This right is known as the cooling-off Period. However, it is important to bear in mind that this right has certain requirements which must be satisfied prior to it being used effectively for the returning of goods or the cancellation of a contract.

The cooling-off period is importantly dealt with in various Acts which include; the National Credit Act 34 of 2005 (the NCA), the Consumer Protection Act 68 of 2008 (the CPA), and the Alienation of Land Act 68 of 1981 (the Alienation of Land Act), all of which will be considered below.

The The National Credit Act

In terms of the NCA, a lease agreement or instalment agreement (as defined in Section 1 of the act) entered into by the consumer at any place other than the registered premises of the credit provider can be cancelled by the consumer within 5 business days of being entered into.

A lease agreement is one in which temporary possession or the right of use of any movable property is granted to a consumer. An instalment agreement involves a sale of movable property in terms of which; the purchase price is to be paid by periodic payments, possession and use of the property is transferred to the consumer and ownership passes to the consumer fully or subject to certain rights in favour of the credit provider.

In terms of Section 121 of the NCA, the consumer must give written notice in the prescribed method to the credit provider cancelling the agreement and must also return any goods received. The credit provider then has a period of seven business days within which to refund the consumer any monies paid in terms of the agreement, subject to reasonable costs for the returning of the goods (if done by the credit provider) as well as costs for the use of the goods and its restoration.

The Consumer Protection Act

In terms of Section 16 of the CPA, the cooling-off period is available only in instances of direct marketing. Direct marketing as per the CPA means to approach a person, either in person or by mail or electronic communication, for the direct or indirect purpose of promoting or offering to supply, in the ordinary course of business, any goods or services to the person. Simply put direct marketing would be a transaction which was not initiated by the consumer personally. In this instance, the consumer has a period of five business days from the conclusion of the agreement or having taken delivery of the goods within which to cancel an agreement which was entered into as a result of direct marketing. This is to be done in the form of a written notice to the supplier cancelling the agreement. The supplier then has to return any payment received from the consumer within fifteen business days after having received notice and the goods supplied to the consumer.

The Alienation of Land Act

There has been much speculation that the effect of the judgment is that consumers no longer have to provide proof of income when applying for credit. This notion is inaccurate. Scrapping of the sub-regulation does not do away with the credit providers need to ascertain the consumer’s gross income as a step towards calculating his discretionary income. The effect of the ruling is that the specific method of validating gross income as required by Regulation 23A(4) is no longer required.

The Alienation of Land Act allows for a cooling-off period in instances where the purchase price of land is less than R250,000.00. Section 29A states that a purchaser of land may within five days of signature of the agreement, cancel the sale. This is to be done by written notice to the seller who then has ten business days to refund any monies paid by the purchaser. The cooling-off period in terms of the Alienation of Land Act will not apply where: the purchaser is not a natural person; the purchase is at a public auction; the seller and purchaser have previously entered into a similar transaction for the same land; the purchaser has reserved the right to nominate another person to take over the rights and obligations of the agreement; and the purchaser purchases the land by the exercise of an option.

It is important to note that not every contract entered into can be unilaterally cancelled however; the growing need to protect vulnerable consumers has necessitated protection in the form of the cooling-off period right which is contained in the aforementioned Legislation.

Despite having this cooling-off right, you as a consumer should still ensure that when contracting and purchasing goods, you do so in a calculated and considered manner so as to avoid buyer’s remorse and the various obstacles associated therewith.

Page last updated: 2021-03-05