Since its introduction and coming into effect in April 2011, the Consumer Protection Act (“the Act”) has become a general subject of often lively discussion. The various industries can no longer regard the CPA as a mere topic of discussion as the Act has significant consequences and only recently some business owners start to realise the impact of the Act on the day-to-day transactions with consumers and their suppliers.
In the Retail Motor Industry, almost all the associations which represent the various motor industries have been confronted by consumers demanding their rights so clearly provided by the Act, in, amongst others, the following provisions:
Section 54 giving the consumer the right to demand quality service;
Section 55 giving the consumer the right to safe, good quality goods;
Section 56 providing an implied warranty of quality to the consumer; and
Section 57 giving the consumer the right to a warranty on repaired goods.
Whilst the consumer has by now become more aware of these enshrined rights, it has become increasingly difficult for businesses and specifically members of the RMI not to capitulate when consumers demand replacement of sub-standard goods or pay for damages suffered as a result thereof.
A common occurrence with members of the RMI (for this purpose also herein further referred to as the “second supplier”) is when they are forced to reimburse a consumer or refit another part to the consumer’s vehicle as a result of such consumer exercising its right/s in terms of the Act – the member knows better than not to comply with legislation as heavy sanctions may follow. What remedies does a member have in circumstances where another supplier in the transaction chain was at fault in providing the faulty part to the member which has been forced to replace it with a new part and provide the labour free of charge? After all, the inter partes agreement between the member and the ultimate supplier in most instances does not qualify as a consumer agreement as envisaged in the Act.
Before the CPA era, all of these transactions, be it between the consumer and the second supplier or the agreement between the first- and second supplier, would have been regulated by contractual- and common law providing the normal remedies of cancellation or demand for specific performance in case of breach. When the concomitant damage suffered needs to be claimed by the aggrieved party, such damage first needs to be quantified in a competent court of law, naturally implying legal costs, time, effort and the great possibility of not being entitled to the full quantum of damage suffered in terms of the final court order.
The CPA era has now brought about a shift in favour of the consumer by automatically providing those remedies without the necessity to resort to a court whilst the second supplier is still in a weakened position to resort to the courts in the attempt to enforce the contractual remedies and claim the damages which are to be quantified. The question therefore is – what remedies can a second supplier apply which are almost or equally efficient to reclaim the damages in the exact same amount which it suffered for supplying a new part and provide the labour to install same? And are exercising of such remedies making commercial sense when considering time and legal costs which need to be reclaimed?
The answer may lie in the contractual remedy known as an indemnity. It may bring about a fair recourse for the second supplier in that it is now discharged of the duty to have the damage quantified by way of proving same in court since the first supplier will, in a properly drafted indemnity provision, indemnify the second supplier from any damages it may suffer as a result of the conduct of the first supplier, be it the delivery of a sub-standard part or otherwise. With a duly constructed indemnity clause a contractual remedy can be created and the quantification of the damage will be directly aligned with the parameters as determined in the indemnity.
It would however remain the responsibility of the suppliers to ensure such indemnity cover all issues pertaining to the damage, including labour and other costs associated with any repairs or refitting. By having the first supplier indemnifying the second supplier for legal costs associated with enforcing the indemnity, the second supplier may very well enjoy the same protection as the consumer.
Douw Breed holds a B.Com and LLB degree and practises as a director at Barnard Incorporated.