Knowing What’s Written – Part II

Previously, in Knowing What’s Written - Part I… One of the world’s favourite love-to-hate personas, the used car salesman, has struck again. Dlamini has barely driven his car off the showroom floor and all manner of mechanical murphies strike. To Dlamini’s dismay, the dealership refuses to return his deposit. Enter another of the world’s favourite love-to-hate personas, the bank. They add insult to Dlamini’s injuries by suing Dlamini under the vehicle finance agreement. You’ve got the facts, you’ve got the legal framework. (No? No problem. You can catch up with Part I here.) We signed off in Part I leaving you with a little challenge: if you were the judge, who would get your vote? Wait a minute… before you assemble the lynching party, sharpen the guillotine blade and amass the burning tyres, here in the 21^st century it’s considered polite, not to mention a legal pre-requisite, to hear both sides of the argument, so here it is. The Bank’s Argument

• In terms of Dlamini’s credit agreement with the bank, Dlamini was entitled to, within five business days, terminate the agreement on notice to the bank and return or tender the return of the vehicle. In order to give effect to such a return, this notice was to be made by fax to the number provided in the agreement. The bank contended that because Dlamini did not notify the bank of the termination in the manner prescribed by this clause, his return of the vehicle to the dealership constituted a “voluntary surrender”. Off the back of this argument, this entitled the bank to sell the vehicle and claim the shortfall from Dlamini.
• The bank claimed that Dlamini knew and understood the terms of his credit agreement with the bank.
• The bank also raised the common law principle of “caveat subscriptor.” He who signs an agreement is deemed to know and understand what it contains.

Dlamini’s Argument Dlamini argued that:

• his return of the vehicle to the dealership effectively constituted a return of the vehicle in terms of the bank’s finance agreement. The fact that he didn’t do so strictly in terms of the clause didn’t deprive him of his right;
• he was entitled to return the vehicle in terms of section 121(3)(a) of the NCA;
• and here’s his trump card – he did not understand the agreement.

So how would you have applied the law to these arguments? Are you still standing by with the lynching party? Let’s see how well you did…. this is what the judge had to say. The Judgment Here’s where things get slightly more legal. But bear with me: this is also the interesting bit. The bit explaining how and why the court threw the weight of the not-insubstantial National Credit Act (“NCA”) at the bank. The court made a number of interesting observations: On the voluntary surrender argument

• The bank failed to establish any factual basis for its contention that Dlamini’s return of the vehicle constituted a voluntary surrender, which is usually triggered by a customer’s inability to comply with the finance agreement.
• Dlamini’s mere non-compliance with the bank’s required procedural formality (faxing a notice of termination to the bank) did not infer a voluntary surrender.

On the matter of whether he understood the agreement

• Admittedly, neither section 63 nor section 64 of the NCA, strictly interpreted, assist an illiterate customer. However, properly interpreted, the onus is on the credit provider to take reasonable steps to inform the customer, especially an illiterate customer, of the material terms of the agreement.
• The bank and its agent caused Dlamini to enter into a finance agreement without reading, interpreting and explaining the material terms to him. Accordingly he could not have known or understood the terms.
• The bank’s failure (itself or through its agent) to inform Dlamini of the contents of the agreement constituted a breach of his rights to information in an official language that he understood, and to information in plain and understandable language.

A side-note here: there was a time when the term “caveat subscriptor” struck fear in the hearts of many. Meaning “let the signer beware” it meant that if you signed it, you were taken to have read and understood it, and were bound by it. Regardless how much legalese, Latin terminology, complex cross-referencing, footnotes, appendices and 8-font fine-print the agreement may have contained. As can be seen in the court’s ruling, the law has evolved since then, and the proverbial playing fields have changed considerably. On the matter of the customer’s right to a rescind a credit agreement in terms of the NCA

• Notable in its absence was any mention in the bank’s credit agreement of the customer’s right to a refund in terms of section 121(3)(a) of the NCA.
• The bank’s failure to disclose the rights afforded to the customer in terms of section 121(3)(a) violates their customers’ right to education and information in terms of section 3 of the NCA. The bank’s selection of what parts of section 121 of the NCA to include, and what to exclude, was deliberate and deceptive. This selective disclosure skewed the agreement in the bank’s favour, and such deception conflicted with the letter and spirit of the NCA.
• When a customer terminates a credit agreement in terms of section 121 of the NCA, the customer has a right to be restored to the status quo ante. A fancy way of saying that the customer needs to be restored to the position that he would have been in had the agreement never been entered into.

In short: the court held that in returning the vehicle, Dlamini had validly rescinded the agreement. And in any event, in light of the bank’s manifest non-compliance with the NCA (the judge expressed her displeasure at a number of the tactics employed by the bank in this case) there was no other choice but to regard the entire agreement as void. Accordingly, the entire agreement was set aside. Plus – he was entitled to a refund from the bank, sufficient to restore him to the position that he would have been in before the credit agreement was entered into. (Cue your lynching party.) What does this mean for you as a consumer? For starters, don’t enter into an agreement that you don’t understand. And if you don’t understand it, insist that the supplier explains it to you. As a consumer, you are entitled to:

• legal contracts that are in plain, easy-to-understand language;
• agreements and legal documents that are in your own (official South African) language. Within reason; and
• have the supplier explain the material terms of the contract to you. In a way and in a language that you understand.

What does this mean for you as a supplier? This case specifically dealt with certain statutory requirements encapsulated within the National Credit Act. But, as a supplier of goods and services, there are some key observations that you should be aware of. Even if the goods and services that you supply do not fall under the NCA, there’s a good chance that they may be impacted upon by the NCA’s sibling: the Consumer Protection Act (“CPA”). The CPA similarly imposes a duty on the supplier to:

• provide legal contracts and agreements in plain, easy-to-understand language
• provide agreements in the consumer’s own (official South African) language, where practicable; and
• explain the material terms and general conditions of the legal contract to the consumer, in a way and language that the consumer understands

Not to mention the requirement on the supplier to provide quality goods and services that are not defective. In Conclusion Know your rights. In the battle of David and Goliath, the consumer has been provided with ammunition to insist on fair and equitable treatment. The days of being bullied by the big boys are over.

Please note that this information is supplied for general information and does not constitute legal advice. It is advisable for you to contact a legal practitioner for guidance in respect of your unique requirements.