A written agreement is a must when paying a deposit

2014-07-22 00:00

WHEN a supplier takes a deposit to hold goods for a consumer, it is vital for both parties to get the agreement in writing, to avoid quibbles down the line.

Verbal agreements are common, and often problematic for suppliers and consumers alike, according to legal experts as this week’s case illustrates.

Lungisani Sithole (23) put down a deposit to buy a used Hyundai Getz for R33 000, in a verbal agreement with Lan Car Sales in Pietermaritzburg.

He paid an initial deposit of R10 000 on June 3, followed by a second payment of R8 500 two weeks later. However, when he unexpectedly lost his job he decided to cancel the deal.

“I went there last week and they said I could get my money back when they sell the car,” Sithole said.

“They gave me no papers to sign. I got a slip [receipt] only.”

On the face of it, the deal appeared to me to be a verbal lay-bye agreement where a supplier keeps goods aside for a consumer, who pays off the purchase price interest free, over an agreed period of time.

Sithole received two receipts detailing the sums paid and the full purchase price of the car.

In terms of the CPA, suppliers may levy a maximum cancellation penalty of one percent of the purchase price, if consumers have been advised upfront. Sithole said he was not advised of any penalty.

However, Lan Car Sales owner Tarek Abdul said the transaction was not a lay-bye agreement and claimed that Sithole had promised to pay the balance, the day after he made the first deposit.

“I am holding the car for six weeks for him. I have no problem to cancel the deal, but you cannot just come today and say you need the money today. He is a trouble customer in my sight,” Abdul said.

Abdul added he did not usually hold vehicles for weeks for clients but that he would take a “holding deposit” to keep them aside for a day.

Abdul said he had told Sithole that he would refund him on August 4. He promised me that he would refund him in full.

CPA legal expert Rosalind Lake of Norton Rose Fulbright said it was arguable that the transaction was not a lay-bye agreement, but the fact the dealer had accepted two part payments meant it could possibly be viewed as one.

“It is extremely important that consumers ensure that they have a written agreement with suppliers setting out the purchase price of the goods that they want on lay-bye, the instalments to be paid, the period of time over which they have to pay and the date on which the full payment will be made,” Lake said.

“If suppliers wish to charge a cancellation penalty, this must also be specified in the agreement because then there will be no doubt as to the type of agreement that they have, and what happens when it goes wrong.”

On the issue of the delay in providing a refund, Lake said the CPA did not stipulate a time period for refunds — except in the case of direct marketing — but that payment should be made in a reasonable time period.

“In the case of a lay-bye and a reservation of goods secured with a deposit, a supplier is entitled to charge a reasonable cancellation penalty. Only in the case of a lay-bye is the penalty capped at one percent of the full purchase price,” Lake said.

Lake added that the deposit remained the property of the consumer until delivery of the goods.

“The money received from the consumer must not be used by the supplier in their business and should be kept aside to easily refund the consumer,” Lake said.

Lake advised consumers to insist on a written agreement.

“If there are any terms that limit the liability of the supplier or impose any risk obligations on a consumer, these should be brought to the attention of the consumer by the supplier. When it comes to lay-byes, unless the cancellation penalty is specified in the lay-bye agreement, the supplier will not be entitled to charge a cancellation penalty.”

CPA legal expert Salina Govindsamy of Gavin Gow Inc. said the transaction was either a sale agreement by instalments or a lay-bye agreement, but this was unclear due to the lack of a written agreement.

“Not having agreements in writing is becoming so common. It is very difficult to have these agreements verbally — it allows too much wriggle room for the supplier if it is not in writing.”

• Send your consumer issues to Lyse Comins at consumer@3i.co.za

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