Discover the critical importance of understanding contract terms before signing, and learn how consumer protection laws can safeguard your rights.
Image: File photo.
When you sign a contract, you explicitly acknowledge that you have read the terms and conditions of the contract and are bound by the obligations the contract places on you. This is the way the law works. It is only in rare circumstances that a court will be sympathetic to the possibility that you may have been pressured or coerced into signing or that you did not fully understand the contract’s terms and conditions.
The legal principle is caveat subscriptor, which means “Signer, beware!”. In a recent commentary on a case centred on this principle, Patrick Bracher, a director of the global law firm Norton Rose Fulbright, noted: “This is a truly fundamental principle. Without it, many debts would become unenforceable and the economy would be severely affected. It is a sound principle that when someone signs a contract they are taken to be bound by the ordinary meaning and effect of the words that appear over the signature.”
The case involved a man (Mr M) who had bought a luxury car through an instalment sale agreement. He had dutifully paid his instalments on the vehicle loan for several years before falling into arrears. The car finance company took Mr M to court to cancel the finance agreement and for an order authorising the sheriff of the court to attach and seize the car. Mr M appealed the judgment against him and the case landed up in the North West High Court in Mahikeng.
According to the judgment, Mr M argued that “he was not able to read the terms and conditions of the agreement, as the (salesperson) informed him that he should simply sign the agreement and he would ‘drive a fancy car’”. He contended that the salesperson “took advantage of him” and that the agreement could not be relied on as there was “no meeting of minds”.
In rejecting Mr M’s case, the judge noted: “It is trite that in terms of the principle of caveat subscriptor the responsibility to understand the agreement before signing is on the person signing the agreement. The appellant has conceded this. He, however, contends that he did not read the agreement because the (salesperson) instructed him not to read it … (This) does not take the matter much further. It is not the appellant's case that he was forced to sign the agreement. According to him, he was merely told that he would drive a fancy car. That cannot amount to inducement. He does not say that he did not want to sign the agreement, or what terms of the agreement would have caused him not to sign the agreement, had he read it.”
The lesson is clear: read and understand a contract before you sign on the dotted line, even if the salesperson says you needn’t bother.
Mind the smallprint
“But hold on,” you might argue. “Contracts are typically not only legally complex and difficult to understand, but in print so small you need a magnifying glass to read them.”
That may be, but it does not let you off the hook. Your signature shows you have read the contract and understood it.
What may let you off the hook, and which was not raised in the above case, are clauses that are overly biased to favour the supplier. One could argue that even if the contract is unfair, if you sign it you are agreeing to those unfair conditions. However, the Consumer Protection Act (CPA) may protect you if the contract removes your rights as a consumer.
If the CPA applies – that is, if the supplier is acting in the ordinary course of business and if the consumer is an individual or a small business with a turnover and assets of under R2 million – then unfair clauses may be invalid.
Unfair terms according to the CPA
Section 48 of the CPA says that a supplier may not enter into a contractual agreement with you to provide goods or services…
• At a price or on terms that are unfair, unreasonable, or unjust; or
• That unfairly, unreasonably, or unjustly requires you to waive any rights, assume any obligation, or waive any liability of the supplier.
The terms must not:
• Be so adverse to you as to be inequitable; or
• Make false, misleading, or deceptive representations.
Regulation 44 under the Act gives a long list of types of clauses that are unfair and thus prohibited. These include clauses that:
• Allow the supplier to change the original price agreed on or to change the terms of the contract;
• Remove or limit your right to claim fair compensation or have recourse to other legal remedies in the case of something going wrong;
• Limit the supplier’s liability for the actions of its employees; or
• Allow the supplier to cancel the agreement unilaterally without you being able to do so too.
The CPA also says that any atypical clauses should be brought to your attention by the salesperson or intermediary you are dealing with. Don’t bank on it. The larger the monetary amount involved, the finer your mental toothcomb needs to be.
* Hesse is the former editor of Personal Finance.
PERSONAL FINANCE