Customers & Risk

In Part 1 (page 36 – August issue), I categorised risk into five categories, namely; 1. PEOPLE, 2. MONEY, 3. LAW, 4. SERVICE and 5. ECOLOGY. I will be dealing with the risk profile of each, i.e. broadly speaking the areas of risk that any business is exposed to can been allocated under these five categories.

In Part2, (page 22 – September issue), we covered the category of ‘People’ under four sub-categories: Staff (discussed in Part 1); Third party service providers (‘TPSP’); and Business Associates. Still under the category of People, Part 3 looks at Customers.

The relationship between the supplier of goods and/or services one the one hand and the customer/consumer on the other hand has always been initiated by advertising, marketing and promotions in general, save possibly for impulse buying, be it at the till as you leave the shop or giving in to a hunger pang as you pass the hotdog stand. However what has changed and has had a major impact on risk is the Consumer Protection Act (Act 68 of 2008 – ‘the CPA’) – prior to the CPA, save for someone acting on an advertisement, purchasing a product or service and then claiming that the advertisement was misleading, the CPA applies to any promotion whether or not it results in a sale & entails criminal sanction!

Let’s have a quick look at one or two relevant definitions:

‘promote’ means to (a) advertise, display or offer to supply any goods or services in the ordinary course of business, to the public for consideration; (b) make any representation in the ordinary course of business that could reasonably be inferred as expressing a willingness to supply any goods or services for consideration; or (c) engage in any other conduct in the ordinary course of business that may reasonably be construed to be an inducement or attempted inducement to a person to engage in a transaction (‘agreement; or supply of goods or performance of service’).

You’ll see from the above that not one of the variations require an actual supply or ‘transaction’ but what it does mean is that you have to scrutinize all your promotional material for CPA compliance – this would include hard copy, verbal/oral (e.g. radio), social media (e.g. blogging, Twitter, Facebook, etc), e-mails & website.

Another definition that is important to suppliers is that of ‘consumer’ as it includes the so-called ‘end-user’ i.e. the user of the product or service who is not a party to the transaction (and therefore e.g. not signing/accepting/aware of your contractual relationship) – what is important in this regard is how you convey your terms and conditions (‘T&C’) or other contractual provisions to such a party and this is where packaging, labels, inserts & notices are extremely important as it may be your only chance to ‘communicate’ with such user.

Compliance includes e.g. not being false, misleading or deceptive (e.g. any form of exaggeration or innuendo) in your documentation and actions and any T&C that does not comply may be deemed to be unfair, unjust and unreasonable. It should furthermore be noted that it is not required that any consumer suffers any kind of damage in order to report you to the CPA Commissioner!
If T&C govern your relationship with the customer, it is imperative that you incorporate that in all promotional material (by adequate reference or in detail AND in a CPA compliant manner e.g. plain language & pertinent) and other communications with the customer along the critical transactional path™ (‘CTP’™) from the outset e.g. from the enquiry/estimate/quote stage up to and including the invoice and statement. If T&C are not introduced at the outset, then even in common law they cannot be introduced (At least not unilaterally) at a later stage.

It also advisable that all transactions be recorded – The CPA requires it although it is not clear whether such recordal has to be audio or in writing, but then I have always advocated confirming all communications in writing/e-mail.

The CPA requires of you to ensure that unusual risks are drawn to the attention of and accepted by the customer, and that the customer has no misapprehension. It has come to my attention that in this context there is a regular occurrence of a lack of explanation and/or misunderstanding about non-refundable deposits arising mainly in my view from a lack of compliance with the aforesaid.

Signage forms an integral part of the management of your risk vis a vis the customer from the physical CTP perspective. So for example signage about any risk such as steps or slippery tiles or unfenced pools/water features must be brought to the attention of the customer at the earliest possible opportunity. Again the content and appearance must meet the CPA requirements e.g. readable font, highly visible and plain language.

It should be borne in mind that even if your customers are legal persona e.g. a company, close corporation etc, and even if their annual turnover or their asset value exceed the (current) limit of R2 million, there are still a number of provisions of the CPA that apply!

Despite the fact that the CPA has not nullified the common law principles of caveat subscriptor (signatory beware) and caveat emptor (buyer beware) and has introduced the concept of responsible consumer behaviour, the supplier cannot rely on these principles if it has not itself complied. Contract management has come to the fore – suppliers should ensure adequate consultation with the customer, signature and retention of documents.

Complaints handling including a well drafted without prejudice letter pertaining to settlement of a dispute when a compromise is negotiated is a prerequisite – to be drafted with input from a lawyer and in consultation with your insurers. This must go hand in hand with staff training. At the end of the day in forms part of your brand management.

Finally the right insurance cover is an absolute must and I’d suggest the following should be a minimum: Business Interruption (e.g. premises burning down); if you have key personnel that may be hard to replace, Key Man Insurance; Professional Indemnity/Errors and Omissions; Public Liability. Discuss this with your insurance broker.

Disclaimer: This article is intended to provide a brief overview of legal matters pertaining to the travel and tourism industry and is not intended as legal advice. © Adv Louis Nel, ‘Louis The Lawyer’, October 2014.

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