By Sarah Thackwell, Partner and Kerry Theunissen, Senior Associate
COVID-19 and the resultant national lockdown have created uncertainity with both consumers and suppliers in respect of their contractual rights and obligations and, more particularly, their rights and obligations in relation to cancellations, postponements and refunds.
1. In March, the Office of the Consumer Goods and Services Ombud (“CGSO”), which is tasked with resolving consumer goods disputes under the Consumer Protection Act No. 68 of 2008 (the “CPA”), released an official statement, in terms of which it made it clear that consumers have a right to a full refund in circumstances where they are unable to take up a booking, reservation or order as a result of travel bans and other lockdown restrictions.
2. The CGSO advises suppliers to treat each case on its merits and develop incentives to encourage consumers to accept postponements where possible.
3. The CGSO’s view reflects the position under our common law, which provides that, if a consumer has paid in part or in full for services to be delivered on a material specified date and the supplier is unable to deliver on that date, consumers will enjoy a claim for repayment of the monies paid, unless the terms and conditions of the contract between the parties stipulate otherwise. Where the contract is silent on the cancellation policy, the supplier is not entitled to refuse to refund the amounts paid to it or to advise that the services will be delivered on a later date to be agreed.
4. This position must be considered against section 47(4) of the CPA, which permits the supplier to raise a defence to a claim for a refund if the consumer unreasonably rejects an alternative offer to satisfy the promise to deliver. If the consumer is being unreasonable, the supplier has recourse against the consumer but it cannot simply impose a blanket no-refund policy.
5. Parties seeking to be excused for non-performance can rely on either the general common law defence of supervening impossibility of performance or on a force majeure (roughly, ‘act of God’ excusing performance) clause included in the contract, if any.
6. While much mention is made of the application of the force majeure clause, it is important to remember that, ordinarily, a force majeure clause will only relieve a party from a potential damages claim arising from non-performance of a contractual obligation, in circumstances where the force majeure clause relied upon contemplates a pandemic as a force majeure event.
7. The legal position is, thus, if, as a result of the COVID-19 pandemic and resultant national lockdown and other restrictions, air travel is not permitted, no economic losses are claimable but the consumer would still have a right to a full refund, unless he is offered an alternative arrangement and unreasonably refuses the offer.
8. In the absence of a force majeure clause, supervening impossibility of performance is a common law defence that applies generally to all contracts. It is submitted that failure to perform as a consequence of COVID-19 and compliance with government directives, will mitigate the risk of being placed in breach and facing a possible damages claim.
9. Consumers are cautioned to carefully consider any offers for accommodation or airline vouchers equal to the full value of the original booking before rejecting them out of hand.
10. The above position does not apply to the extent that government directives preventing performance, such a travel bans, are not in place. Should a consumer cancel a booking in anticipation of an issue arsing, the ordinary legal position relating to cancellations of travel arrangements apply.
11. Suppliers who provide services outside of South Africa are not subject to the CPA. South African Courts could, however, 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 the Republic, more particularly in that the CPA gives the courts the power to make innovative orders to promote the spirit and purpose of the CPA.