The Consumer Protection Act and cross-border transactions

The Consumer Protection Act, 2008, will come into effect on 31 March 2011. The purpose of the CPA is to promote and protect the rights of South African consumers and this protection could, potentially, extend to offshore transactions involving South African consumers. The CPA will affect day-to-day business transactions for the supply of goods and/or services unless specifically exempted. A transaction includes people acting in the ordinary course of business concluding an agreement with a consumer to supply goods and/or provide services to a consumer in exchange for some form of consideration, including cash or exchange. This application of the CPA is important to bear in mind when determining where a transaction takes place. Two important questions arise in relation to cross-border transactions. The first is: can one contract out of the CPA by making the transaction governed by a foreign law? It is common-place in transaction contracts to have a governing law clause. This clause will state that the transaction must be interpreted and governed by the law of a particular country. The second: does the CPA apply in the case of a transaction occurring outside of South Africa but with a governing law clause making the transaction subject to South African law? The wording of the CPA (“every transaction occurring within the Republic”) specifically brings any transaction of the type contemplated in the former query within the ambit of the CPA. Whilst the parties have elected to have the transaction governed by foreign law, certain parts of the transaction will still be subject to the CPA. Exporters into South Africa and other people who supply offshore goods and services to South Africa should ensure that their transactions do not occur within South Africa if they do not wish to be subject to the CPA. Exporters should conclude the contract outside of South Africa and also supply the goods or provide the services outside South Africa so not to be subject to the CPA. Failure to do either will result in the CPA applying to the transaction. One way of ensuring this is to sign the contract in, for example, England and to deliver the goods to an English address as fulfilment of supplying the goods. The transaction has then occurred outside of South Africa. The consumer will then arrange for further delivery into South Africa should they so require. The subsequent delivery into South Africa (which the original supplier will not be a party to) will be a new transaction and that transaction will be governed by the CPA as the goods will be supplied into South Africa. Will a transaction occurring outside of South Africa be subject to the CPA if the transaction has a South African law governing clause? On a literal interpretation, the CPA would not apply as the transaction did not occur in South Africa. However, the literal interpretation may not be adhered to by the South African courts who could extend the CPA to a transaction involving a South African consumer in order to protect the consumer’s rights even though the transaction did not occur in South Africa. The CPA gives the courts the ability to make innovative orders to promote the spirit and purpose of the CPA. This means that the courts could take the approach that the parties intended to be subject to all of South African law, regardless of the fact the transaction did not occur in South Africa, and such voluntary assumption causes the transaction to occur in South Africa and the CPA to apply. Whilst extending the CPA beyond its application to transactions occurring in South Africa would seem to be an act beyond the powers of courts and the CPA, it cannot be conclusively stated that such an extension will not happen (whether it is correct or not). The courts strong powers could see them deciding that the CPA will apply to offshore transactions that have voluntary been subjected to South African law so as to protect the South African consumer and promote the CPA. Although consumer rights are of great importance, exporters may find themselves unintentionally infringing the provisions of the CPA as they are not aware of the provisions of the CPA and that they are subject to it. In order to ensure that a cross-border transaction is not governed by the CPA, exporters into South Africa and people supplying goods and services from offshore, should not allow their transactions to occur in South Africa and, for certainty, should not voluntarily choose for the transaction to be subject to South African law. Failure to do this may result in exporters feeling the full force of the CPA should they breach its provisions.