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  • NPOs as Suppliers and Consumers

    The Consumer Protection Act of 2008 (the Act) came into operation on 1 April 2011 and holds significant implications for nonprofit organisations (NPOs) in South Africa. This article focuses on some of the practical implications of the Act on NPOs - to the extent that they fall within the definitions of consumer and supplier in terms of the Act. 

    NPOs as suppliers:

    A number of NPOs carry on business activities through the marketing of goods and services and would fall within the Act’s definition of a supplier, being; ‘a person who promotes, supplies or offers to supply any service. A service includes, for example, the provision of any education, information, or advice. NPOs that carry on business activities should, among others, take the following into account:

    Business names:

    No NPO must, in terms of the Act, carry on doing business, advertise, promote, offer to supply or supply goods or services or enter into an agreement with a consumer, unless its name is registered in terms of the Act or any other public regulation. This means that the practice of ‘trading under an unregistered name is outlawed in terms of the Act. However, Minister Rob Davies must first publish a six-month notice before this requirement takes effect.

    Unfair, unreasonable or unjust contracts:

    NPOs must ensure that agreements entered into with consumers are compliant with the Act. NPOs must not enter into contracts with consumers that are unfair, unreasonable or unjust. Contracts that are, for example, excessively one-sided in favour of the NPO, are considered unfair, unreasonable or unjust. NPOs must also draw a consumer’s attention to any clause in an agreement that limits the liability of the NPO, or impose an obligation on the consumer to indemnify the NPO.

    Prohibited agreements:

    NPOs must not enter into agreements that limit or exempt them for any loss because of the gross negligence of the NPO, or any person acting for the NPO. 

    Consumer’s right to demand quality service:

    Consumers have the right to timely performance and completion of services. The services should be performed in a manner and with the quality that persons are generally entitled to expect. This would include NPO membership agreements. 

    Implied warranty of quality:

    Goods being supplied to consumers must comply with the standards listed in the Act. The standards include good quality, good working order, free of defects, useable and durable for a reasonable period of time having regard to its use and surrounding circumstances. Goods failing these standards can be returned by the consumer without penalty to the NPO within six months of delivery for repair, replacement or refund.

    Direct Marketing:

    NPOs, when approaching someone in person, by mail or electronic communication to request them to make a donation, will have to adhere to the onerous direct marketing provisions. This applies irrespective whether NPOs are carrying on trading activities. See article written by Peter Hendricks – NPO Legal Issues: Volume 10

    Intermediaries:

    Agents who sell services or products on behalf of NPOs to persons will have to disclose to them prescribed information. This includes, in terms of the draft regulations, the intermediary fee and the basis for calculating it.   

    Membership fees:

    Membership fees paid by members to NPOs remain the property of the member until the NPO makes a charge against it in line with the Act. NPOs may make such charges once a month in advance and on the pro-rata portion of the amount. NPOs must not treat membership fees as their own property. They are liable for any loss resulting from a failure to do so. 

    Membership renewals:

    The Act regards the supply of any goods or services by a NPO in the ordinary course of business to any of its members in exchange for membership, as a consumer transaction, even if no membership fee is involved. By implication, this means that NPO membership arrangements, involving individuals, may be subject to the maximum period prescribed by the Minister.

    NPOs as consumers: 

    NPOs, as juristic persons, may also qualify as ‘consumers’ in terms of the Act if their asset value or annual turnover, at the time of the relevant transaction, does not exceed the amount of R2 million. The Minister has determined the method of calculating the assets and turnover of a juristic person. The consumer agreements entered into by many NPOs with suppliers may accordingly fall within the ambit of the Act. The implication is that many NPOs would be in a position to exercise the consumer rights captured in the Act.

    This means that Service-level Agreements entered into with NPOs may fall within the provisions of the Act and must not, be unfair, unreasonable or unjust. As stated above, agreements that are, for example, excessively one-sided in favour of the supplier, are considered unfair, unreasonable or unjust. How this will translate in practice remains to be seen.

    It is important to note that the provisions regulating the expiry and renewal of fixed-term contracts do not apply to agreements between juristic persons, regardless of their annual turnover or asset value.

    Issues to consider:

    The Act cannot be disregarded by the nonprofit sector because it holds significant implications for NPOs operating in South Africa. In light of the Act, they will have to:
    • Check that their funding practices are not in breach with the direct marketing provisions;
    • Review their contracts with consumers, members and suppliers;
    • Recruit suitable staff and board members when carrying on business activities;
    • Obtain advice and assistance, where applicable, to ensure compliance with the Act;
    • Consider and budget for the cost implications of compliance; and
    • Manage the risks and explore the opportunities presented by the Act.
    Ricardo G. Wyngaard, nonprofit lawyer, Ricardo Wyngaard Attorneys. This article was first published on The Forum website. It is republished here with the permission of the author.

    Disclaimer:
    The information contained in this article is of general in nature and should not be interpreted or relied upon as legal advice. The information may not be applicable to specific circumstances. Professional assistance should be obtained before acting on any of the information provided in this newsletter.
    Author(s): 
    Ricardo G. Wyngaard
  • Global Trends in NGO Law

    ‘Global Trends in NGO Law’ is a quarterly publication which complements the International Journal of Not-for-Profit Law, which comprises contributions from legal experts around the world. This publication synthesises key developments relating to the legal and regulatory issues that affect NGOs. This publication is electronically distributed without charge to subscribers.

    For more information or to subscribe, click here.
  • Constitutional Court Appointments Will Test Judicial Waters

    When the Judicial Service Commission (JSC) meets later this year to consider who will replace four titans of the Constitutional Court when their terms expire this October, it will be one of the first real opportunities to assess where our courts stand since this year’s election.

    The departing judges are Pius Langa, Yvonne Mokgoro, Albie Sachs and Kate O’Regan. There are, perhaps, two immediate questions. First, will the new judges continue to uphold the Court’s reputation for promoting progressive values? Thus-far the 11 member Court has a track record of well-reasoned judgments that have deepened democracy by kick-starting several programmes to implement social and economic rights, and by generally showing empathy for ordinary citizens, women, immigrants, and poor or otherwise vulnerable people.

    The second pressing question is: how susceptible are judicial appointments to politics? Even in various mature democracies, presidents are known to steer the judicial system to a degree. For example, in the United States, presidents have chosen liberal or conservative judges who are expected to concur on divisive matters such as abortion, the death penalty, federal versus state rights and so on. Imagine then, for example, that recent rumblings on the relevance of our nine provinces morph into a highly contested legal dispute, or that the new national planning commission clashes with the DA-led Western Cape cabinet over housing policy in the province. Is it possible or likely that judges could be appointed for their suspected antipathy towards or support of government policy or provincial powers?

    Furthermore, should we be concerned that President Jacob Zuma, as national leader plays an important role in choosing judges to the Constitutional Court, and with first-hand experience as to how individual judges can reach divergent legal conclusions, and himself bruised by some judges and not by others, can he be expected to remain neutral?

    The impending round of appointments is bound to attract strong opinions. Yet how much does the public really know about the appointment process and our judges, and what qualities do we expect in the four soon-to-be-appointed candidates? In South Africa, JSC members are drawn not only from the executive and legislature, but also from the legal profession and academia. The involvement of a variety of stakeholders - and not just politicians - is aimed at maintaining a more independent JSC.

    However, there have nonetheless been calls for the JSC to improve the balance in its composition in favour of reducing the number of politicians. 15 of its 23 members are political appointments: the Minister of Justice, four appointees of the President and ten parliamentarians.

    Since the end of apartheid, the appointment process has undergone major change. Any member of the public may nominate a judge, and nominees are required to submit a standard questionnaire and CV to the JSC. Short-listed candidates are interviewed in public even though television and radio broadcasts are not permitted and post-interview deliberations still take place in private. Extensive input is provided by the legal profession. Once the JSC completes its deliberation, and before October, a list of seven candidates will be submitted to President Zuma, who will then choose four judges to serve on the Court, after consulting with the Chief Justice and leaders of political parties in Parliament.

    One of the departing judges, Pius Langa, is the country’s Chief Justice and Court President, and Zuma is also primarily responsible for appointing a new Chief Justice.

    Although most of the public will be unable to attend the interviews and may not know much about individual candidates, we generally do have an image of what an ideal judge should be like. We can probably agree that judges should be fiercely independent, that they should never be compliant or wary of ruling against government or business or otherwise powerful individuals, and should possess considerable expertise. Judges should also have good case management skills and be of excellent ethical standing.

    Apart from general public expectations, the Constitution specifically stipulates that race and gender considerations must be taken into account in order to ensure a representative and transformed Bench.

    It is worth noting that South Africa continues to face challenges in ensuring that the pool from which such candidates are drawn is deep enough. Two of the four departing Constitutional Court judges are women and it remains to be seen whether this balance will be replicated. Judges retain the final word on the meaning of the Constitution and the appropriateness of particular policies in cases appearing before them. This important responsibility is aimed at keeping Parliament and government accountable, and is not about turning judges into “gods” or elevating courts above the executive and legislative branches. However, this arrangement does also mean that judges hold significant power over government and citizens.

    How, then, should a “judge’s own values” feature in the overall assessment? Deciding on what constitutes the set of appropriate values that should guide judges has proved controversial. Specifically, there has been debate as to whether the appropriate values should be the judge’s own personal values, society’s values, the values contained in the legal system, or popular values. Such debate is common world-wide and poses interesting philosophical questions.

    In South Africa, it would appear that our Constitution provides the most useful source of “appropriate values” that judges should embody when making their judgments. These values include a strong commitment to judicial independence and accountable government, and also to the attainment of a progressive and compassionate social order.

    But the question however remains: how does the JSC practically assess candidates’ commitment to such values? Apart from examining past judgments (if the candidate is already a judge) or other professional records, the JSC should craft insightful questions designed to assess whether the candidate possesses a solid understanding of the new constitutional framework, whether he or she is strongly committed to social justice, and whether he or she shows proper appreciation of the independent role played by the Court in achieving progressive constitutional goals.

    Two further matters require attention when judges are being considered for the Constitutional Court. The first relates to a judge’s willingness to craft novel and creative remedies that make real differences to people’s lives. Vulnerable litigants often win cases but effective means to ensure that government, or other offending parties, do indeed make amends are then lacking. Second, poorer litigants lack adequate access to the Court because of financial and procedural constraints. The JSC should seek to determine whether candidates offer realistic proposals for widening access to transformative justice in South Africa.

    It is worth noting that 15 years into democracy, there is still an urgent need for wider public debate on the qualities required of judges. Furthermore, greater clarity on the selection criteria currently utilised by the JSC is long overdue. The four new judges appointed to the Constitutional Court will fundamentally shape constitutional democracy over the next 12 years, and alongside their colleagues, can play a crucial role particularly in assisting the less powerful members of society.

    The upcoming process provides a good opportunity to explore questions and reforms that may assist the JSC in selecting the most independent and suitable candidates for the job.

    Shameela Seedat is a Senior Researcher at Idasa’s Political Information and Monitoring Service. This article first appeared in Business Day on 6 June 2009 and is republished with permission from Idasa
    Author(s): 
    Shameela Seedat
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