BUSINESS owners running very small businesses have the right to cancel any fixed-term contracts they enter into by giving 20 business day’s notice and other than having to pay a reasonable cancellation penalty, are exempt from having to pay additional charges.
Trudie Broekmann, an attorney and senior associate of Webber Wentzel, said section 14 of the Consumer Protection Act is just one of a number of provisions that offer businesses with an annual turnover of up to R2 million protection when dealing with suppliers, landlords, direct marketers and handymen.
Section 14 does not however apply to agreements between two juristic bodies. Sole proprietorships that fall below the turnover threshold would therefore qualify, but a CC or company could also qualify if the agreement was with an individual person, rather than with another company or partnership, said Broekmann.
The act, which came into effect on April 1, also includes sections for franchisees, while sections 60 and 61 of the act, which allow businesses to claims damages against a supplier that sells them defective or unsafe goods, applies to firms big and small, said Broekmann.
She said the turnover threshold was last year mooted at R3m, but was subsequently brought down to R2m by the Minister of Trade and Industry Rob Davies, when he published the regulations for the act in March.
Broekmann said the act also offered those small businesses that fall below the R2m threshold, various others measures of protection, such as protection against unwanted marketing and the bundling of products. Contracts had to also be drafted in plain and simple language.
Under Section 17 of the act business owners can at any time cancel advance bookings, reservations as well as orders, unless these are for custom-made goods. The supplier would however be allowed to levy a cancellation fee, or retain any reasonable deposit that has been made.
Small businesses protected under the act would also be allowed a cooling-off period of five business days after delivery of any goods or services purchased as a result of direct marketing. The business owner would be able to return the goods and would not be liable to pay a cancellation fee.
Another advantage for businesses classed as consumers is that service providers that repair or provide any replacement parts for property (such as mechanics and plumbers)
belonging to such business owners must, under Section 15, provide quotations to the owner before they can proceed with the work.
She said Sections 79-81 pertaining to business names (a requirement for businesses of all sizes) had not yet come into effect. The section requires that any person conducting business do so under a business name that is registered. It means that entities will no longer be allowed to have a “trading as” name that differs from that of their registered business name.
Broekmann said the idea is that using a registered name would make it less confusing for suppliers or consumers that want to pursue legal action against such a company.
According to the act an announcement by the minister of trade and industry on business names must not be made earlier than April 2012, with at least six months given before the relevant sections take effect.
Franchisees are also protected under the act, which allows franchisees the freedom to choose their own suppliers, except in three specific instances.
These says, Eugene Honey, a partner at Bowman Gilfillan, are when the franchisor or their suppliers offer goods or services at a better price, when the goods or services supplied are reasonably related to the brand or when the bundling of goods offers a franchisee convenience,
The head of the National Consumer Commission, Mamodupi Mohlala, said by the end of July about 7 000 complaints had been lodged with the commission and that the majority of these emanated in the motor vehicle, retail and telecommunications sectors.
She was unable to say as yet how many of these cases were filed by business owners that fall below the R2m threshold, however she pointed out that the complaints lodged recently at the commission against Vodacom in relation to a network failure in June, were from individuals not business consumers.
This article appeared in Business Day on 16 August 2011.
Stephen Timm is a