What Is The Cooling Off Period After Signing A Contract In South Africa?

Written by Herman Bonnet
31 March 2023

Signing a written agreement or contract is a momentous commitment that is often overshadowed by the anticipation of receiving a new cell phone, motor vehicle, or house following the agreement. This excitement is often so overwhelming that consumers (people buying a service or product) sign agreements with clouded judgement, which may result in them disregarding the fine print or terms and conditions of the contract. Fortunately, the “cooling-off right” in South Africa protects consumers by offering them the opportunity to reconsider and possibly rescind (cancel) their purchase during a cooling-off period.

The “cooling-off right” has been implemented and provided for in the Consumers Protection Act 68 of 2008, the National Credit Act 34 of 2005, the Alienation of Land Act 68 of 1981, and the Electronic Communications and Transactions Act 25 of 2002.

In this article, we will examine the cooling-off right as it relates to the National Credit Act 68 of 1981 and the Alienation of Land Act 68 of 1981.

What is the Cooling-Off Right?

The cooling-off right implies that a consumer may rescind a transaction within a certain period after purchase without reason or penalty. Consumers receive the cooling-off right in terms of the various agreements regulated by the above-mentioned acts.

How is the Cooling-off Right put into practice?

If a consumer opts to exercise their cooling-off right to rescind a transaction, they must notify the supplier (seller) in writing or in another recorded manner within five days from either the date:

  • of the transaction;
  • when the agreement was concluded; or
  • when the goods were delivered to the consumer.

This recorded notification is referred to as a “termination letter.”

What happens once the Notice of Termination has been given?

Once the supplier has received the termination letter or the goods returned from the consumer, the supplier should return any payment received from the consumer in terms of the transaction within 15 business days. Similarly, the consumer must return the goods to the supplier within 15 business days of sending the letter of termination.

Any suppliers who deal with direct marketing, for example, selling goods or via telephone or mail order, are required to inform the consumer of their cooling-off rights in the manner and procedure prescribed by law. If a supplier dealing with direct marketing fails to inform the consumer that they have a cooling-off right, the goods delivered to the consumer may legally be considered unsolicited (unrequested).

A rescinded transaction must always place the contracting consumer and supplier in the same position as they would have been before entering into the contract.

Will I receive a full refund when rescinding the agreement?

A consumer may only receive a full refund for any consideration paid during the transaction if:

  • The agreement arose from direct marketing;
  • The consumer has provided the supplier with the termination letter during the cooling-off period;
  • The goods have been returned to the supplier within the given timeframe;
  • The goods have not been altered after taking receipt;
  • The goods qualify for the cooling-off right. This excludes goods like foodstuffs and fixed property;
  • Public health and public regulations are not being violated.

What does the National Credit Act stipulate with regard to cooling-off rights?

Agreements between a credit provider and a consumer that provide the consumer with credit facilities or advances are governed by the National Credit Act, which provides cooling-off rights.

The act indicates that a consumer may terminate a certain credit agreement in terms of the National Credit Act within five business days after the date on which the agreement was signed or entered into.

After the consumer has notified the credit provider of their decision to terminate the credit agreement with a termination letter, they must arrange and pay for the return of any money or goods received within seven business days. The credit provider must also refund any money the consumer has paid under the agreement within seven business days of being notified of the termination.

The termination of a credit agreement may be subject to the consumer paying the supplier an amount that is reasonable to have the goods returned to the credit provider and restore the goods to their original sellable conditions. In some cases, the supplier may also be entitled to reasonable rent for the use of the goods during the time they were in the consumer’s possession.

Can the Purchase of Land be terminated by the Cooling-Off Right?

Within five days after signing a written offer to purchase or deed of alienation (an agreement of sale, exchange, or donation of land), a purchaser may revoke or terminate the offer to purchase or deed of alienation by delivering a termination letter to the seller or the seller’s agent.

This cooling-off right only applies to land as defined in the Alienation of Land Act, and it is advised that the deed of purchase reflects the right to revoke the offer to purchase within five days of the purchaser signing it.

The cooling-off right with regard to land does not apply in the following circumstances:

  • The purchase price of the land is less than R250,000.00.
  • The purchaser is a trust or a person other than a natural person.
  • The land is purchased at a publicly advertised auction.
  • The seller and purchaser have previously entered into a deed of alienation of the same land on substantially the same terms.
  • The purchaser has reserved the right to nominate or appoint another person to take over the rights and obligations of the purchase.
  • The purchaser purchases the land through the exercise of an option that was open for exercise for a period of at least 5 days.

How should I proceed to Rescind an Agreement?

Start by carefully reading the contract you signed, as most contracts include a cancellation or termination clause that sets out the consequences and process of rescinding the agreement.

If you decide to rescind the agreement, you must accept the consequences that may arise from terminating the agreement, as no mechanism exists to re-enter an agreement once it has been terminated.

Always follow the correct cancellation process according to the contract and the applicable laws when rescinding an agreement. Also, make sure your termination letter includes the correct averments and has substance in order to avoid getting involved in a prolonged and expensive legal battle to return the parties to the original pre-contract conditions.

Burger Huyser Attorneys’ contract specialist attorneys are well-versed in handling the termination of agreements, whether or not the agreement makes provisions for cooling-off rights on behalf of both the consumer and the supplier. Contact us for assistance with your written agreements, contracts and the termination thereof should you require assistance!

DISCLAIMER: Information provided in this article does not, and is not intended to constitute legal advice. READ MORE