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Consumer Affairs
Wednesday, February 20, 2013 - 15:44
Defence caution

For a century and more, the “voetstoots” clause in a contract has proved a solid bulwark for a seller of goods or property. In essence, this clause records that the subject of the sale, whether movable goods or immovable property, is sold "as is” and without any warranties as to its condition or suitability. This meant that the purchaser had to accept the goods with all defects, whether latent (hidden) or patent (obvious).

The only exception was if the seller knew of the existence of a latent defect and failed to disclose it. This was referred to as “fraudulent non-disclosure” and the courts have consistently ruled that this cancels any voetstoots protection the seller would otherwise have enjoyed. As a result, if the purchaser can prove fraudulent non-disclosure, which is not always as easy as one might think, then the seller will be obliged to give restitution i.e. to take back the goods and refund the purchase price.
However, says Michael Hands, a Consultant in the Commercial Department at Garlicke & Bousfield Inc., “The Consumer Protection Act of 2008 (CPA) has, since its commencement date of 31st March 2011, brought about major changes to the legal situation outlined above. Sections 51, 55 and 56 of the Act provide that goods sold, including land and buildings, must be offered with an implied warranty that they are free of latent defects.”
He says there are certain circumstances in which the law would not apply to a transaction of sale. These are where the seller or any intermediary, such as a broker or agent, is not regarded as a dealer or trader in the goods sold; and also where the purchaser is a body corporate, such as a company or close corporation, a partnership or trust, and which has assets of R2 million or more, or a turnover of more than R2 million annually. This means, whereas a natural person is fully protected by the Act, only a corporate entity “of modest means” enjoys the same protection when purchasing goods or assets.
“This is the reason,” says Hands, “why people selling their houses who are not affected by the Consumer Protection Act’s provisions (because they are not dealers or traders) are required to provide the estate agent with a full description of any latent defects in the property. This is because the agent, as an intermediary, might otherwise be held directly liable by a disappointed purchaser.
“Similarly, if you are contemplating buying a property or a substantial asset like a motor vehicle, it is worth thinking twice before buying it in a company name. And if you want to hold the asset in a company, it is worth considering the acquisition of a brand new company with no other assets through which to conclude the transaction.”
 

Copyright © Insurance Times and Investments® Vol:26.1 1st January, 2013
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