I’m working on a particularly interesting challenge at the moment which was introduced by proposed regulations to the Consumer Protection Act which goes fully into force in a couple months. First a little background. The Consumer Protection Act will have a fairly radical impact on consumer rights in South Africa. One of the better publicized influences (and probably one of the more understated and yet more important ones) is the requirement that contracts be written in plain language. This requirement, alone, should have a dramatic benefit for consumers who have been confused by legal jargon for far too long. This is particularly important as contracts become increasingly complex to accommodate new legislation like the Consumer Protection Act, ironically.
The Consumer Protection Act prohibits a number of practices and this includes certain types of contractual terms. Section 48 of the Act deals with “Unfair, unreasonable or unjust contract terms” and section 48(1)(a) has the following to say:
48. (1) A supplier must not—
(a) offer to supply, supply, or enter into an agreement to supply, any goods or services—
(i) at a price that is unfair, unreasonable or unjust; or
(ii) on terms that are unfair, unreasonable or unjust;
The Act, itself, doesn’t give too many specific examples of which terms would be considered “unfair, unreasonable or unjust” although it does mention that terms which are “excessively one-sided in favour of any person other than the consumer or other person to whom goods or services are to be supplied” would be considered problematic.
The Trade and Industry Minister published draft regulations to the Consumer Protection Act for comment in November and one of the provisions in these draft regulations caught my eye. The draft regulations deal with a number of issues (the draft regulations run to about 96 pages) and right at the very end is section 56 which gives some substance to the Consumer Protection Act’s prohibition on contractual terms which are considered to be unfair and unreasonable. Section 56(o), in particular, proposes deeming the following types of clauses to be unfair:
enabling the supplier to unilaterally alter the terms of the agreement including
the characteristics of the product or service
This seems fair, suppliers should be able to change contract terms and conditions that consumers have reviewed and agree to. Well, they seem fair until you consider that website terms and conditions are contracts with the website’s users and visitors and they generally contain a clause which allows the website owner to change the terms and conditions unilaterally. This common clause in website terms and conditions has an important, practical function. It allows the website owner to make what may be important changes to its contract with its users which may be necessary for the website’s proper functioning and operation without the need to negotiate the changes with each and every user and visitor individually. Ordinarily, parties would be required to negotiate amendments to their contracts and agree on them for them to be of any force and effect. In the context of a contract between a consumer and a supplier in the ordinary course, requiring that the parties negotiate and agree on changes to their agreement is beneficial to the consumer because it means the consumer won’t find herself subject to terms she didn’t agree to when buying the product or requesting the service.
The problem is that this requirement doesn’t scale very well, certainly not with the sorts of numbers of consumers (aka, users and visitors) who frequent popular websites. In fact, requiring website owners to negotiate changes with users and visitors (casual visitors can probably be handled a little differently to ongoing users, I think) would likely result in multiple versions of the terms and conditions, each containing variations particular to each consumer’s negotiations with the website owner. The complexity and variation of the terms and conditions would only increase in time and managing these contracts would become practically impossible. The only way to circumvent this is a clause in the contract (aka, the website terms and conditions) which enables the website owner to change terms and conditions unilaterally. Unfortunately, this could become a prohibited practice if this line item remains in the published regulations.
This presents a challenge to website owners who may soon find that this often understated clause could well become an unfair or unreasonable term and, effectively, prohibited. I have a couple ideas how to deal with this but the one risk is not implementing a solution which doesn’t amount to another prohibited practice under the Act, for example a term which has as its general purpose or effect defeating the purposes or policy of the Consumer Protection Act (section 51(1)(a)(i)). It is an interesting challenge and short of a workable contractual mechanism or legislation relief, this may be something for a court to address in years to come.
On a related note, it is also worth bearing in mind that this is not the only respect in which the Consumer Protection Act impacts on website terms and conditions. The Consumer Protection Act includes a host of requirements which necessitate a number of changes to website terms and conditions, particularly those dealing with liability limitation mechanisms, so be sure to have your website terms and conditions reviewed and amended.