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The Legal implications of the Voetstoots clause & The CPA

When you buy something there is an implied warrantee that the object of sale is free from any defects. It is however possible, that one can contract out of this implied warranty by inserting an exemption clause into the contract that says that the sale is voetstoots. The term voetstoots is a Dutch term and has always  been used to describe a sale without guarantees where the object is sold ‘as is’ with all its faults. 

Voetstoots clauses are extremely common in written sale agreements and have often become the object of suspicion.  Many hold the view that such clauses enable a contracting party with a stronger bargaining position to take advantage of and exploit the other weaker contracting party.  Since the property is being bought “as is”  many believe that the seller cannot be held liable for any defects which later come to the fore.  This view is in fact incorrect and a misinterpretation of the law.

The Common Law Position

Under the common law, a buyer is allowed to cry foul where the property was defective at the time of the sale and where the seller knew of the defect but failed to disclose it to the buyer, knowing full well that if the buyer knew about it, he would either not have continued the purchase or would have negotiated a more favourable purchase price. In such an instance the onus is on the buyer to show the misrepresentation on the seller’s part.

Therefore liability on the part of the seller will arise if a defect is latent and not patent.

Latent defects are flaws that are not obvious to the human eye and are hidden from view, for example, a leaking geyser or faulty wiring.  In such a case, the buyer could not have reasonably known about the defect prior to the purchase thereof, and should be able to hold the seller liable for such a defect.

Patent defects are faults that are noticeable and visible to a diligent person through a normal inspection, for example, a broken window or dent in a door.  Here, it is the buyer’s responsibility to thoroughly investigate and inspect the property before purchasing it, and consequently, it is he that must bear the brunt should it later transpire that such a defect existed.

The warranty against latent defects applies automatically by operation of law and forms part of the naturalia (terms which are, as a rule, attached by the law to every contract of a particular class) of every contract of sale.

The New Position – The CPA

The Consumer Protection Act No. 68 of 2008 (“the Act”) has a significant influence on the common law warranty against latent defects.

The Act, however, doesn’t apply to a transaction where the buyer is a juristic person whose asset value or annual turnover at the time of the transaction equals to or exceeds the threshold value of R2 million, as determined by the Minister of Trade and Industry from time to time. 

In other words the CPA will not apply to property transaction that fall outside these parameters, as in generally the case in the sale or leasing of more substantial industrial premises 

The Act will also not be applicable where goods and services are not supplied in the ordinary course of business. Where a home owner for example wants to sell his home and sells it once-off and not in the ordinary course of his business, the common law position  will be applicable. Thus, not all sale agreements necessarily fall under the Act and its protections for the buyer against defects.

Section 55 of the Act in stipulates that a buyer has a right to receive goods that are appropriate to the purpose for which they are bought, and that they should be of good quality, in working order and without defect.

This means that it does not matter whether the buyer could see the defect or not, nor whether the seller fraudulently masked the defect. Defects must be expressly disclosed and a general clause that the purchaser accepts the property “as is” will not be acceptable (as long as the sale is subject to the Act).

These provisions do not however apply where the buyer has been expressly informed that the property is offered in a specific condition, and has expressly agreed to accept it in that condition, or knowingly acted in a way consistent with accepting it in that condition.  In other words, if the buyer is aware that the property is sold in the condition in which it stands at the date of sale and where the buyer has had an opportunity to inspect the property, the voetstoots clause will still form part of the agreement.

Conclusion

It is very important for buyers and sellers to understand the concept of voetstoots before entering into any contract of sale.  One must be sure to acquaint himself with the new relating provisions of the Act and their legal implications before entering into any sale agreement.

For more information on purchasing, renting or investing in commercial and industrial property in Cape Town, please contact Robert Ryll | Cell Number: 082 374 2662 | Landline: 021 552 4100 or Email: rob@primeindustrial.co.za


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