22 June 2023 . Reasonable cancellation penalty charge in terms of

Reasonable cancellation penalty charge in terms of section 17 against cancellation without penalty in terms of section 19

read with section 21 of the Consumer Protection Act.

EXPLANATORY NOTE 4 0f 2023

Date: 22 June 2023.

Reasonable cancellation penalty charge in terms of section 17 against cancellation

without penalty in terms of section 19 read with section 21 of the Consumer Protection

Act.

1. PURPOSE.

The purpose of the explanatory note is to guide consumers and suppliers on circumstances

wherein a cancellation penalty may or not be imposed. This will be done by thoroughly

interpreting the provisions of sections 17 and 19 read with section 21 of the Consumer

Protection Act (CPA).

2. FACTUAL BACKGROUND.

2.1 In most cases consumers are faced with the challenge of not knowing where and when

is the supplier entitled to charge a cancellation penalty in terms of the CPA.

2.2 Therefore we will begin by looking at the provisions of section 17 of the CPA. Section

17 provides as follows:

Reasonable cancellation penalty charge in terms of section 17 against cancellation without penalty in terms of section 19

read with section 21 of the Consumer Protection Act.

“Consumer’s right to cancel advance reservation, booking or order

17.(1) This section does not apply to a franchise agreement, or in respect of any

special-order goods.

(2) Subject to subsections (3) and (4), a consumer has the right to cancel any advance

booking, reservation or order for any goods or services to be supplied.

(3) A supplier who makes a commitment or accepts a reservation to supply goods or

services on a later date may—

(a) require payment of a reasonable deposit in advance; and

(b) impose a reasonable charge for cancellation of the order or reservation,

subject to subsection (5).

(4) For the purposes of this section, a charge is unreasonable if it exceeds a fair

amount in the circumstances, having regard to—

(a) the nature of the goods or services that were reserved or booked;

(b) the length of notice of cancellation provided by the consumer;

alternative consumer between the time of receiving the cancellation notice

and the time of the cancelled reservation; and

(d) the general practice of the relevant industry.

(5) A supplier may not impose any cancellation fee in respect of a booking,

reservation or order if the consumer is unable to honour the booking, reservation or

order because of the death or hospitalisation of the person for whom, or for whose”

2.2 Section 17(2) provides that a consumer has the right to cancel any advance booking,

reservation or order for any goods or services to be supplied, however, section 17

(3)(b) provides that a supplier who makes a commitment or accepts a reservation to

supply goods or services on a later date may impose a reasonable charge for

cancellation of the order or reservation subject to subsection (5).

2.3 The act provides that the supplier must charge a reasonable cancellation penalty,

therefore, the question will be how does the supplier determine the reasonable

cancellation charge? and the answer lies with section 17 (4) which provides that a

charge is unreasonable if it exceeds a fair amount in the circumstances, having regard

to the nature of the goods or services that were reserved or booked, the length of

notice of cancellation provided by the consumer, the reasonable potential for the

service provider, acting diligently, to find an alternative consumer between the time of

receiving the cancellation notice and the time of the cancelled reservation; and lastly

the general practice of the relevant industry.

2.4 There is an exception to the supplier’s right to charge a cancellation penalty in terms

of section 17(5) of the CPA, which provide that a supplier may not impose any

cancellation fee in respect of a booking, reservation, or order if the consumer is unable

Reasonable cancellation penalty charge in terms of section 17 against cancellation without penalty in terms of section 19

read with section 21 of the Consumer Protection Act.

to honor the booking, reservation or order because of the death or hospitalization of

the person for whom, or for whose benefit the booking , reservation was made.

2.5 Another exception is in terms of section 19(6):

Consumer’s rights with respect to delivery of goods or supply of service

“19. (6) If the supplier tenders the delivery of goods or the performance of any services

at a location, on a date or at a time other than as agreed with the consumer, the

consumer may either—

(a) accept the delivery or performance at that location, date and time;

(b) require the delivery or performance at the agreed location, date and time, if

that date and time have not yet passed; or

performed services as unsolicited goods or services in accordance with section

21.

2.6 Read with section 21(9) which provide that:

“21 (9) If a consumer has made any payment to a supplier or deliverer in respect of

any charge relating to unsolicited goods or services, or the delivery of any such

goods, the consumer is entitled to recover that amount, with interest from the date on

which it was paid to the supplier, in accordance with the Prescribed Rate of Interest

Act, 1975 (Act No. 55 of 1975).”

2.6 Section 19(6) is read with Section 21, and it stipulated that the consumer has a right

to cancel the agreement/transaction/booking or order without penalty, treating any

delivered goods or performed services as unsolicited goods or services in accordance

with section 21.

2.7 The above applies only where the supplier had tendered to deliver goods or perform

any services (e.g provide wedding events or accommodation venue) at a location, on

a date or at a time other than as agreed with the consumer and therefore upon the

election by the consumer to cancel the booking, the consumer is entitled to recover

the amount paid for the booking, with interest from the date on which it was paid to the

supplier.

Reasonable cancellation penalty charge in terms of section 17 against cancellation without penalty in terms of section 19

read with section 21 of the Consumer Protection Act.

3. EXPLANATORY NOTE.

3.1 The preamble of the Consumer Protection Act provides that the Act was enacted to

promote and provide consumer education. It is on this basis that this explanatory note

is produced, to promote the spirit and purpose of the CPA.

3.2 Consumers may cancel any booking, reservation, or service but the Supplier’s right to

charge a cancelation penalty will be determined by the circumstances surrounding the

cancellation.

3.3 The supplier is entitled to charge a cancellation penalty where the decision by the

consumer to cancel the services rests solely on the consumer and there is nothing on

the part of the supplier which contributed to the consumer reaching that decision.

However, such cancellation penalty should not be unreasonable as prescribed by

section 17(4) of the CPA.

3.4 On the other hand the supplier may not charge a cancellation penalty wherein the

decision for the cancellation of services is dependent on the fact that the supplier had

tendered to supply the services on different terms (time, date, and location). In this

situation, the consumer is entitled to receive the full amount paid for the

booking/services and interest calculated from the date payment was made.

3.5 Therefore, section 17 gives the supplier a right to charge cancellation penalty whereas

section 19 read with 21 gives the consumer the right to recover the amount paid when

and where the supplier fails to supply the services on terms and conditions as agreed.

For non-binding legal opinion or advisory, email us at Advisory@thencc.org.za.