Mrs Jansen van Rensburg (Mrs van Rensburg), an Afrikaans speaking 85-year-old
lady, purchased a defective baking oven from an electronic repair shop, sold to her by
Guzman (Pty) Ltd. Both Guzman (Pty) Ltd and Mrs van Rensburg concluded a credit
agreement which agreement was written in English. In terms of the credit agreement
she would pay an instalment of R250.00 (two hundred and fifty rand) a month to
finance the oven. In addition, Ms van Rensburg was informed as part of the agreement,
that she could return the oven at any given time.
After three weeks, she found the oven to be too problematic and decided to return it.
When she did, she was under the impression that she would receive her money back
and the agreement would be cancelled with immediate effect. On the contrary,
Guzman (Pty) Ltd demanded payment in terms of the credit agreement and issued
Mrs van Rensburg with a summons when she continued to default on the payments.
Guzman (Pty) Ltd argued that the agreement was, in fact, not cancelled and that Mrs
van Rensburg voluntarily returned the oven. A clause in the credit agreement
stipulated that agreements must be cancelled by sending a written notice to Guzman
(Pty) Ltd for purposes of a paper trail, which Mrs van Rensburg had failed to do.
Answer the following questions based on the factual scenario above:
(a) Mrs van Rensburg approaches you for legal advice on her contractual dispute
above. Advise Mrs van Rensburg of the common law principles, relevant statutory
obligations, and her contractual remedies. Refer to relevant case law to support
your legal advice. (16)
(b) Mrs van Rensburg is impressed with your skills as a contract law attorney. She
decides to appoint you as her attorney. Mrs van Rensburg instructs you to write a
letter of demand to Guzman (Pty) Ltd. Draft a letter of demand that sets out your
client’s demands in accordance with your answer provided at (a) above.
(15)
2
(c) Assume the matter is referred for arbitration in the Bloemfontein High Court. In
preparation for court proceedings, you must review the contractual clauses of the
credit agreement carefully. Draft the Party clause between Mrs van Rensburg and
Guzman (Pty) Ltd, duly represented by its director, Mr Jonas Brothers identity
number: 81090900546, as it would appear in the credit agreement.
(8)
(d) Provide four objectives that an attorney, when drafting a contract to comply with
section 64 of the National Credit Act to ensure its drafting compliance. (8)
(a) In this scenario, Mrs van Rensburg purchased a defective baking oven from Guzman (Pty) Ltd under a credit agreement. The agreement, written in English, stipulated that Mrs van Rensburg would pay monthly instalments to finance the oven. She was also informed that she could return the oven at any time. After three weeks, Mrs van Rensburg decided to return the oven due to its problems, expecting to receive her money back and cancel the agreement. However, Guzman (Pty) Ltd demanded payment and issued a summons when she defaulted on the payments.
Common law principles and statutory obligations:
1. Defective goods: Mrs van Rensburg can rely on the common law principle of implied warranty against latent defects. If the oven was indeed defective, she has the right to reject it and claim a refund or cancellation of the contract. This principle is supported by the case of Van der Merwe v Bosch.
2. Consumer protection: The Consumer Protection Act No. 68 of 2008 aims to protect consumers from dishonest business practices. Mrs van Rensburg may argue that Guzman (Pty) Ltd violated her consumer rights by not refunding her money and cancelling the agreement when she returned the defective oven.
3. Right to fair and responsible lending: The National Credit Act No. 34 of 2005 provides certain rights and protections to consumers in credit agreements. It imposes obligations on credit providers to ensure responsible lending and requires clear and understandable agreements. Mrs van Rensburg can argue that the credit agreement was unfair and did not comply with the provisions of the Act.
Contractual remedies:
1. Rescission: Mrs van Rensburg may seek the rescission of the credit agreement based on the defective and problematic nature of the oven. Rescission means canceling the contract ab initio (from the beginning) and placing the parties in the position they were in before the agreement.
2. Refund: Mrs van Rensburg can demand a refund of the money she paid towards the oven, as the defective nature of the product entitled her to reject it and claim her money back.
3. Damages: If Mrs van Rensburg suffered any losses or damages due to the defective oven, she may be entitled to claim damages to compensate for her losses. This could include the costs of repairs or replacement of the oven.
(b) [Your Name]
[Your Address]
[City, Postal Code]
[Email Address]
[Phone Number]
[Date]
Guzman (Pty) Ltd
[Address]
[City, Postal Code]
Dear Sir/Madam,
RE: DEMAND FOR REFUND AND CANCELLATION OF CREDIT AGREEMENT
I have been instructed by my client, Mrs Jansen van Rensburg, in relation to the contractual dispute concerning the defective baking oven she purchased from your company under the credit agreement.
It has come to our attention that Mrs van Rensburg returned the oven within three weeks of purchase, as it proved to be problematic and unfit for its intended purpose. As per the terms of the credit agreement, she was informed of her right to return the oven at any given time. Therefore, she expected to receive her money back and the agreement to be cancelled.
However, we were disappointed to receive the summons from your company demanding payment under the credit agreement, despite Mrs van Rensburg's legitimate reasons for returning the defective oven. We believe that she is entitled to a refund of the money she paid, as well as the cancellation of the credit agreement.
Based on the common law principle of implied warranty against latent defects, Mrs van Rensburg has the right to reject the defective oven and claim a refund or cancellation of the contract. The Consumer Protection Act No. 68 of 2008 further protects her as a consumer and requires the fair treatment of customers. Guzman (Pty) Ltd's refusal to refund her money and cancel the agreement constitutes a violation of her consumer rights.
Therefore, we hereby demand the following:
1. A full refund of the amount paid by Mrs van Rensburg towards the oven.
2. The cancellation of the credit agreement, with immediate effect, as it is clear that the oven was sold to her with latent defects.
3. Cease all further attempts to collect payment under the credit agreement, as it is unjust and would constitute an unfair business practice.
We trust that you will reconsider your position and comply with our demands within 14 days from the receipt of this letter. Failure to do so will leave us with no option but to pursue legal action to protect Mrs van Rensburg's rights and seek appropriate remedies.
Yours faithfully,
[Your Name]
[Your Designation]
[Law Firm Name]
(c) PARTY CLAUSE
THIS PARTY CLAUSE ("the Clause") is entered into between:
Mrs Jansen van Rensburg (hereinafter referred to as "the Purchaser"), identity number [Purchaser's Identity Number], and residing at [Purchaser's Address],
AND
Guzman (Pty) Ltd, duly represented by its director, Mr Jonas Brothers, identity number 81090900546, and having its registered address at [Company's Registered Address] (hereinafter referred to as "the Seller"),
both collectively referred to as "the Parties".
The Parties hereby agree as follows:
1. Jurisdiction: Any dispute arising out of or in connection with this agreement shall be referred to the Bloemfontein High Court for arbitration.
2. Cost Allocation: Each Party shall bear its own costs associated with the arbitration proceedings, including legal fees, unless otherwise awarded by the arbitrator.
3. Arbitrator Selection: The Parties shall appoint a single arbitrator within 14 days of a dispute arising. If they fail to agree on an arbitrator, a magistrate shall be appointed by the Bloemfontein High Court.
4. Arbitration Procedure: The arbitration shall be conducted in accordance with the rules of the Arbitration Foundation of Southern Africa (AFSA) and any applicable statutory provisions.
5. Arbitration Award: The decision of the arbitrator shall be final and binding on the Parties, and the award may be made an order of court upon application to the appropriate court.
IN WITNESS WHEREOF, the Parties have executed this Party Clause on the date first above written.
_____________________________
Mrs Jansen van Rensburg (Purchaser)
_____________________________
Guzman (Pty) Ltd (Seller)
By: Mr Jonas Brothers (Director)
(d) Objectives when drafting a contract to comply with section 64 of the National Credit Act:
1. Clarity and simplicity: The contract should be drafted in clear and simple language that is easily understandable by the average consumer. This ensures that the terms and conditions of the credit agreement are transparent and easily comprehensible.
2. Fair and reasonable terms: The contract should contain terms that are fair and reasonable, taking into account the nature of the credit being provided and the circumstances of the consumer. Unfair terms that exploit the consumer or create an imbalance of rights and obligations should be avoided.
3. Adequate disclosure: The contract should include all necessary information required by the National Credit Act to ensure full and adequate disclosure. This includes the total cost of credit, interest rates, fees, and any potential penalties or charges that may be incurred.
4. Consumer protection measures: The contract should incorporate provisions that protect the consumer's interests and promote responsible lending. This may include provisions that allow for the cancellation or early settlement of the credit agreement, as well as mechanisms for dispute resolution and the enforcement of consumer rights.